AMD Warns of 11 Percent Drop in Sales on Weak PC Results in Europe, China
Chipmaker Advanced Micro Devices just warned that weak sales of PCs in Europe and China, and among consumers generally, will hurt its sales this quarter, and said its revenue in the quarter ended June 30 will fall by 11 percent sequentially. Previously, it had given guidance for sales to be flat, or grow by 3 percent.
It’s another big miss for AMD, and for the tenure of its still relatively new CEO, Rory Read. AMD in April reported a quarterly loss of more than half-a-billion dollars as it continue to carry costs associated with the spinoff of its former manufacturing division, now called GlobalFoundries. The loss was triggered by a restructuring of AMD’s relationship with GlobalFoundries that forced AMD to take a $703 million one-time charge.
Here, the problem appears to be market conditions, primarily demand. Investors will likely hammer shares of AMD rival Intel tomorrow, worrying that the market conditions in Europe and China must be impacting it as well. But Intel has long been arguing with investors and analysts alike that it continues to see strong growth opportunities in the developing economies, like China and Brazil. It will be interesting to compare AMD’s and Intel’s results in the coming weeks.
AMD shares fell by 33 cents, or nearly 6 percent, in after-hours trading in response to the news.
AMD’s announcement is below. Intel shares fell by 27 cents, or about 1 percent, though it had news of its own that may be affecting shareholder sentiment. It’s taking a 15 percent stake in the Dutch chipmaking equipment concern ASML.
AMD Announces Preliminary Second Quarter Results
Revenue Expected to Decrease Approximately 11 Percent Sequentially; Company Effectively Manages Gross Margin
SUNNYVALE, CA–(Marketwire -07/09/12)- AMD (AMD) today announced that revenue for the second quarter ended June 30, 2012 is expected to decrease approximately 11 percent sequentially. The company previously forecasted second quarter 2012 revenue to increase 3 percent, plus or minus 3 percent sequentially. The lower preliminary revenue results are primarily due to business conditions that materialized late in the second quarter, specifically softer-than-expected channel sales in China and Europe as well as a weaker consumer buying environment impacting the company’s Original Equipment Manufacturer (OEM) business.
The company expects second quarter gross margin to be approximately in line with prior guidance. Operating expenses for the second quarter are expected to improve and to be approximately 8 percent less than prior guidance of approximately $605 million, a result of tightly controlled expenses in the quarter.
AMD will report second quarter 2012 results after market close on Thursday, July 19, 2012. AMD will hold a conference call for the financial community at 2:00 p.m. PT (5:00 p.m. ET) that day to discuss second quarter financial results and to provide information regarding expected third quarter results. AMD will provide a real-time audio broadcast of the teleconference on the Investor Relations page at http://www.amd.com. The webcast will be available for 10 days after the conference call.