By Don Clark and Josh Beckerman
Advanced Micro Devices Inc. said revenue fell more than it
expected in the second quarter, the latest sign of worsening
conditions in the market for personal computers.
The company, the longtime minority supplier of microprocessors
behind Intel Corp., said Monday it expected to report that revenue
for the period ended in June was 8% lower than it reported for the
first period. AMD previously had projected a 3% sequential
decline.
AMD, which expects to issue its financial results formally on
July 16, attributed the decline to weak consumer demand for PCs.
The company also said a manufacturing transition would cause a $33
million charge, further squeezing its profit margins.
Shares of the Sunnyvale, Calif., company fell 13% in after-hours
trading following the announcement.
AMD's disclosure follows a series of negative signs in the PC
sector, including Intel's move in March to cut its outlook for the
first quarter.
AMD has seen its market share fall dramatically in chips for
computers. It posted a $180 million loss in the first quarter and
said it would lose money through the first half of the year.
Lisa Su, named AMD's chief executive last year, in May set a new
strategy that emphasized fewer businesses where AMD could make a
profit. The company, which supplies chips for game consoles sold by
Sony Corp. and Microsoft Corp., expects to build on its strength in
chips that render graphics in markets such as virtual reality. She
predicted at the time that AMD would return to profitability in the
second half of the year.
On Monday, however, AMD said its gross margin will be lower than
expected in the second period. One factor is a higher mix of chips
from segments beyond computers that include processors that AMD
customizes for game console makers and others. Those businesses,
which rely on competitive bids for sales contracts, often carry
lower profit margins.
The other factor reflects the company's manufacturing strategy.
AMD, which uses partners to make its chips, disclosed that it had
begun several designs for new products that would exploit an
existing production process. But the company said it had instead
decided to shift to a more advanced production recipe that creates
transistors that are faster and use less energy. That decision
triggered the $33 million charge.
Before the announcement Monday, analysts polled by Thomson
Reuters projected a loss of 13 cents a share for the quarter on
revenue of about $1 billion. In the year-earlier period, AMD
reported a net loss of 5 cents a share on revenue of $1.44
billion.
Write to Don Clark at don.clark@wsj.com and Josh Beckerman at
josh.beckerman@wsj.com
Access Investor Kit for Advanced Micro Devices, Inc.
Visit
http://www.companyspotlight.com/partner?cp_code=P479&isin=US0079031078
Access Investor Kit for Intel Corp.
Visit
http://www.companyspotlight.com/partner?cp_code=P479&isin=US4581401001
Subscribe to WSJ: http://online.wsj.com?mod=djnwires