Advanced Micro Devices has been suffering from an identity crisis and their earnings report for the first quarter of 2011 is no different. AMD managed to post net income of $510M on $1.6B in revenue which of course sounds amazing on paper.

The only thing is that $492M of this profit figure actually had nothing to do with income from operations as AMD’s actual operating income was only $54M on $1.6B and their gross margin was down to 43% from 45% the previous quarter and down from 47% the same quarter a year ago. The $510M of net income results in an EPS of $0.68 on $1.61B in revenue. When we take non-GAAP earnings (which exclude the $492M) we see that AMD has taken in $0.08 per share which is $0.03 more than what analysts had expected. This means that AMD is likely to surge in trading based on beating expectations.

This $492M difference in AMD’s actual income and their net income is a result of their noncash gain of $492 million related to the dilution of their equity interest in GlobalFoundries. Mubadala Development Company recently took control of ATIC, majority owner of GlobalFoundries – and started to increase their share in GlobalFoundries, resulting in this 492 million dollar check. This transfer boosted AMD’s actual net income from $18M to $510M, which seems to be a reoccuring theme for AMD. They simply cannot show a quarter where something doesn’t artificially inflate their income numbers. Although we are very happy for AMD for being able to actually post another quarterly profit,  their net income continues a series of quarters where their net income is affected by some sort of event or settlement that brings their net income much higher than their operating income.

The biggest things that AMD really has to worry about right now is finding a permanent CEO and making sure that their APU strategy is on mark with both price and performance. AMD cannot falter in the face of Intel’s Sandy Bridge screwup. There’s no denying the fact that many OEMs were unhappy with the experience of the recall and it definitely cost a lot of them time and money they didn’t want to lose. As a result, this is a gift to AMD to release Bulldozer and open that door wide open again and create some revenue in both their consumer and enterprise businesses. If AMD can regain marketshare in both and remain profitable, they can definitely expect their shareprice to rebound.

At the given moment, AMD’s share price is already towards the upper range of its 52 week high. It is very likely that AMD could surge beyond that if they can show promise in Llano and Bulldozer. So far, Brazos appears to be gaining some traction in the budget market but it still has a ways to go and there is no way AMD can be profitable on Brazos alone. If you have listened to AMD’s earnings calls for probably the past two years Bulldozer has been the topic of discussion, if Bulldozer doesn’t deliver on expectations we don’t necessarily see how AMD can move forward considering the flop that Barcelona was. We want AMD to be successful because we want more competition in the market and to drive prices down for the highend, midrange, and even entry-level. Simply put, AMD’s success is good for everyone. Including Intel.

At the moment of writing, AMD’s price is at $8.71 up $0.08 during the day of trading but it is likely that since the markets are closed for Good Friday that Monday will see a fairly good day for AMD’s share price.