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Follow UsDuncan Martell
SAN FRANCISCO: Advanced Micro Devices Inc. on Tuesday said it expects a
"substantial" second quarter operating loss as weakness in PC sales
will cause revenues to fall far short of estimates, and its shares fell in after
hours trade.
AMD, Intel Corp.'s chief rival in the microprocessor market, said it sees
sales for the quarter at $620 million to $700 million range, off from its
previous projection of $820 million to $900 million.
As a result, AMD said it anticipates "a substantial operating loss"
for the quarter. Analysts surveyed by First Call had on average predicted a loss
of about 9 cents. In the same period one year ago, the company reported a profit
of 5 cents a share, on revenues of $985 million.
"As we have seen in previous statements from a number of other
companies, there is broad weakness in the personal computer market and it is
adversely affecting AMD," said Robert Rivet, AMD's chief financial officer,
said in a release.
Shares of Sunnyvale, California-based AMD fell to $8.50 on Instinet after the
announcement, down from its close of $10.30 on the New York Stock Exchange
today. Intel shares also fell after the bell, sliding to $21.32, after closing
at $22.02 on Nasdaq.
The warning adds AMD's voice to the chorus of top technology names whose
quarterly results appear to be at risk, as a result of overall reluctance to
spend on capital, particularly for technology assets.
On Tuesday, Apple Computer Inc. trimmed its outlook for quarterly revenues,
citing soft demand in consumer and creative markets. In addition, analysts
following International Business Machines Corp. today continued to cut their
estimates for the world's largest computer maker due to continued weak spending
on technology hardware.
"It's huge miss but it's not surprising," said Hans Mosesmann, an
analyst at Prudential Securities. "My sense was that they were going to
pre-announce." Intel on June 6 itself lowered its revenue guidance, citing
lower-than-expected demand in Europe. It said it expects second-quarter revenue
of $6.2 billion to $6.5 billion, compared with an April forecast of $6.4 billion
to $7.0 billion.
Although analysts and investors at the time had prepared themselves for a
narrowing of the revenue range toward the lower end, that Intel took the bottom
out of the previous range was a surprise, indicating that demand was even weaker
than earlier thought.
AMD's Rivet said that chip business is particularly weak in Europe and North
America. However, he noted that AMD's flash memory business is improving and
expected to show sequential sales growth.
On a conference call with analysts, chief executive Hector Ruiz said that in
the United States, "it's a real battle" with Intel. AMD had said it
expected unit shipments of processors would fall 5 per cent to 10 per cent in
the second quarter, but they will fall more, Rivet said on the call.
He added that average selling prices for its Athlon and Duron chips will fall
in the second quarter from the first, compared with earlier expectations that
they would be flat quarter on quarter.
The company said it continues spending at record levels on research and
development in its strategic area and is executing well on its previously
reported product and technology road map schedules. AMD is expected to report
its full second-quarter financial results on July 17.
(C) Reuters Limited.