Tags: Chipmaker | AMD | Revenue | Forecast

Chipmaker AMD's Revenue Forecast Disappoints

Thursday, 19 July 2012 06:57 PM

Advanced Micro Devices forecast third-quarter revenue below expectations on Thursday as it struggles with a weak global economy, tepid PC sales and relentless pressure from top chipmaker Intel.

AMD, like others in the PC industry, has been hit by a shaky global economy and the consumer shift toward tablets and smartphones, and it has also lost market share.

AMD's stock fell more than 5 percent in after-hours trading following its earnings report.

"Clearly our performance in the quarter was disappointing and did not meet our commitments," AMD Chief Executive Rory Read told analysts on a conference call. "We expect macro headwinds will continue for the third quarter."

AMD said its second-quarter revenue was $1.41 billion, in line with a warning from the company last week and down from $1.57 billion a year ago. It estimated third-quarter revenue would fall 1 percent from the second quarter, plus or minus 3 percent.

Analysts had expected AMD would have $1.50 billion in revenue for the current quarter, according to Thomson Reuters I/B/E/S.

On Tuesday, Intel, a barometer of the PC industry, cut its 2012 revenue growth forecast to between 3 percent and 5 percent, from a prior forecast of "high single-digit growth."

Read told analysts AMD's processor shipments would grow by a low single-digit percentage this year, and that the Sunnyvale, California-based company is trying to improve its ability to execute.

Concerns about AMD's execution and fears that global PC sales could be worse than expected, with emerging signs of weakness in China, have helped push the chipmaker's stock down about 38 percent since the end of March.

"I don't think there's any reason to have any confidence in their guidance, as weak as it is. It's below seasonal, but I have to believe there's very low visibility in this environment right now," said Alex Gauna, an analyst at JMP Securities.

Also on Thursday, chipmaker Freescale Semiconductor reported a better-than-expected quarterly profit, helped by tighter cost controls, but forecast third-quarter revenue below analysts' estimates, sending its shares down 12 percent after hours.




In recent years, AMD has carved a niche providing processors for low priced laptops, with Intel dominating higher-end PCs. But as AMD ramps up production of its new Trinity and Brazos 2.0 processors, it lost some market share in the second quarter, Read said.

And with PC manufacturers planning to launch cheaper laptops using inexpensive chip designs licensed by ARM Holdings, AMD could face additional competition.

"I continue to believe this is a story that's structurally disadvantaged relative to the greater momentum behind ARM-based computing and the greater ability to invest and innovate of Intel," Gauna said.

Appointed last year, Read is realigning AMD's PC-focused business to meet growing demand for mobile gadgets. But the company has yet to make any major progress selling its chips for new kinds of devices.

And while AMD cuts spending to protect profitability, Intel recently announced it was investing $4.1 billion with Dutch chip equipment maker ASML to speed up the development of new manufacturing technology.

AMD had a quarterly net profit of $37 million, or 5 cents a share, compared with a net profit of $61 million, or 8 cents a share, a year-ago. Adjusted earnings were 6 cents per share.

Shares of AMD fell 5.6 percent in extended trade after closing down 0.61 percent at $4.86.

© 2018 Thomson/Reuters. All rights reserved.

1Like our page
Thursday, 19 July 2012 06:57 PM
Newsmax Media, Inc.

Newsmax, Moneynews, Newsmax Health, and Independent. American. are registered trademarks of Newsmax Media, Inc. Newsmax TV, and Newsmax World are trademarks of Newsmax Media, Inc.

© Newsmax Media, Inc.
All Rights Reserved