Yep, AMD Can Lean on Servers

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I couple of days ago, I wondered if Advanced Micro Devices' (NYS: AMD) server chips were either good enough or cheap enough to steal sales from larger rival Intel (NAS: INTC) . The results are in, and AMD says that the Bulldozer line of server processors is doing just fine.

AMD's sales climbed 2% year-over-year to $1.7 billion, right in line with analyst estimates. Adjusted earnings per share jumped from $0.14 to $0.19, helped by slightly wider gross margins and tight operating-cost controls. It was the fifth consecutive quarter of positive operating income after years of red ink on that line. The company collected a cool $100 million in free cash flows, up from $251 million of negative FCF a year ago.

Record sales of laptop chips certainly helped, but the biggest growth driver was found in the data center. That seemingly underwhelming Bulldozer chip whipped up double-digit percentage growth in the server division. And maybe the disappointing results in early benchmarks came from less-than-optimal system builds -- AMD claims that a Dell (NAS: DELL) PowerEdge system sets records for power efficiency in blade servers while a Hewlett Packard (NYS: HPQ) ProLiant box is the fastest two-socket database server so far.

Granted, AMD is slicing and dicing its benchmark picks to shine the brightest possible light on the new chips. Still, these are impressive achievements when you consider the powerful competition from Intel's Sandy Bridge products. Maybe AMD's server strategy isn't all about low cost after all.

For the next quarter, management projects revenues of about $1.56 billion, a bit below the analyst consensus of $1.6 billion and down from $1.61 billion in 2011.

Shares fell about 1% in after-hours trading, but AMD is hanging tight with Intel since Chipzilla's sector-boosting report last week. All in all, it looks like AMD gave investors exactly what they were looking for.

Starting 2012 with a market-beating 20% climb, AMD is off to a good start in the new year. That's impressive, but Foolish analysts have found an even more promising stock for your portfolio. Learn all about The Motley Fool's Top Stock for 2012 in a special report -- free for a limited time.

At the time this article was published Fool contributorAnders Bylundholds no position in any of the companies mentioned. The Motley Fool owns shares of Intel. Check outAnders' holdings and bio, or follow him onTwitterandGoogle+.Motley Fool newsletter serviceshave recommended buying shares of Intel and writing covered calls on Dell. Try any of our Foolish newsletter servicesfree for 30 days. We Fools may not all hold the same opinion, but we all believe that considering a diverse range of insights makes us better investors. We have adisclosure policy.

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