AMD needs to "break the monopoly" to achieve profitability

AMD has to grow its market share in the microprocessor market to 30 percent for the company to reach a positive cash flow, AMD chief executive Hector Ruiz said at the Morgan Stanley Technology Conference in San Francisco.

"We need to get to share numbers that are indicative of breaking the monopoly. We need to get about 30 percent share to sustain [our business]," Ruiz said.

About one in every four processors that are shipped today are manufactured by AMD. The CPU market is dominated by Intel.

AMD on the morning of Ruiz' presentation issued an official warning that its earnings will fall short of previous projections. The previous guidance pegged revenue at US$1.6bn to US$1.7bn. The chipmaker didn’t provide a new revenue projection.

Ruiz was quick to dispel any fears over the long term future of the chip maker. The relative revenue drop was caused by channel partners that postponed orders and will only have a temporary effect.

AMD traditionally sells most of its chips through channel partners and only recently has been expanding its ties with computer makers. As demand from these original equipment manufacturers (OEMs) grew at a faster pace than previously expected, AMD had to limit the number of chips that it could make available to channel partners. Those partners therefore temporarily increased the number of chips that they purchased from AMD competitors and it will take them a few months to switch back.

"We couldn't recover as fast as we would like. As a result we will miss the projections for the quarter," Ruiz said.

"That issue should be alleviated this year. We are now serving OEMs and the channel as always before."

Ruiz remained optimistic about the overall growth potential for the x86 chip market. Although he doesn't expect a short term impact from Windows Vista this year, he expects that Microsoft's latest operating system will push chip sales growth to 20 per cent.

"As Vista become pervasive and better understood, more people will be embracing it."

Analyst firm IDC has previoiusly projected that 2006 PC and x86 server sales will grow by 10 percent. It projects the market to grow by 11.3 percent in 2007 and 10.9 percent in 2008.

Ruiz expects a sales boost from new project categories such as the forthcoming One Laptop per Child project as well as increase adoption of computers for home entertainment and medical applications.