AMD’s results show PC market is improving

Chipmaker Advanced Micro Devices forecast revenue above expectations in another sign that PC demand is holding up better than anticipated

By - April 20, 2012
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Chipmaker Advanced Micro Devices forecast revenue above expectations in another sign that PC demand is holding up better than anticipated.

Shaky economies in Europe and the unsteady recovery in the United States, a growing consumer preference for tablets, and a recent shortage of hard drives due to flooding in Thailand last year have taken a toll on the PC industry.

“There was a decent Q1 number and decent Q2 guidance, and that’s indicative of a rebound in PC builds as hard drives become more available,” said MKM Partners analyst Daniel Berenbaum.

Better-than-expected results from Microsoft on Thursday supported that view, sending the software maker’s shares up 2.5 percent after hours.

Other chipmakers offered mixed results, with some pointing to a recovery in sales after customers, worried about the economy, trimmed inventories last year.

AMD faces stiff competition as Intel starts shipping its newest powerful PC chip, code-named Ivy Bridge, and builds sales of its recently launched Romley server platform.

Sunnyvale, California-based AMD has been launching new processors of its own, and recently appointed CEO Rory Read has vowed to improve on long-standing execution troubles.

On Tuesday, Intel posted earnings confirming the PC industry is alive, but not kicking, in a report that failed to fuel new stock gains after a recent run-up.

Global PC shipments in the first quarter grew 1.9 percent, year-over-year, research firm Gartner said last week. That was better than the firm’s previous forecast of a 1.2 percent dip in PC shipments, which were hurt last year after flooding in Thailand damaged hard drive factories.

“The hard (drive) situation has pretty much gotten past everybody in the industry … with the only issue being some residual higher pricing that’s floating around in the market,” AMD CEO Read told analysts on a conference call.


Fairchild Semiconductor and Cypress Semiconductor Corp each forecast quarterly revenue above analysts’ expectations as customers clear out chip inventories and place new orders.

Freescale Semiconductor Holdings I Ltd, whose chips are used in cars, cellphones and consumer products like Inc’s Kindle electronic reader, posted first-quarter revenue of $950 million, shy of the $961 million expected. It said Chief Executive Rich Beyer planned to retire once a successor is found and takes over.

Flash memory chipmaker SanDisk, hurt by falling prices for its products, posted first-quarter revenue that was also short of already lowered estimates. And programmable chipmaker Altera also posted weak results that fell short of analysts’ estimates.


Following major layoffs last year and a new, more flexible wafer agreement with contract manufacturer GlobalFoundries, AMD’s stock has surged 44 percent so far this year, much more than Intel’s 14 percent rise and the S&P 500’s increase of about 10 percent.

In March, AMD dumped its equity stake in GlobalFoundries, three years after spinning off the company that makes most of its computer chips, in a move that frees it to strike manufacturing deals with other foundries.

As part of the deal, AMD agreed to make a payment of $425 million to GlobalFoundries, incurring a related charge of $703 million that pushed AMD into a loss for the first quarter.

Also in March, AMD finalized its $334 million acquisition of SeaMicro Inc, a deal – applauded by investors – meant to establish a foothold in smaller, low-power computer servers, a potential area of growth as Internet services expand and corporations look to save on electricity bills.

AMD posted first-quarter revenue of $1.59 billion, down from $1.61 billion in the year-ago period. It estimated second-quarter revenue would rise 3 percent from the previous quarter, plus or minus 3 percentage points.

Analysts had expected AMD to post $1.56 billion in revenue for the first quarter and $1.59 billion for the current quarter, a sequential rise of 2 percent, according to Thomson Reuters I/B/E/S.

AMD had a net loss of $590 million, or 80 cents a share, compared to a net profit of $510 million, or 68 cents a share, in the year-ago period. Adjusted earnings were 12 cents per share, beating expectations of 9 cents.

Shares of AMD rose 1.63 percent in extended trade after closing flat at $7.97.

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