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AMD looks at sinking sales, gulps: It's worse than we thought

Chipmaker lowers Q2 guidance in light of awful PC numbers

Struggling chipmaker AMD warned investors on Monday that its second-quarter results, which are due to be announced on July 16, will be lower than previously expected.

During a conference call with financial analysts at the end of the company's previous quarter in April, AMD chief financial officer Devinder Kumar said he expected Q2's revenue to be down 3 per cent from the first quarter, with a 3 per cent margin of error – so in the worst-case scenario it could be down 6 per cent.

Turns out it will be even worse than that. On Monday, the chipmaker said second-quarter sales had underperformed even its gloomiest estimates, and that investors should expect revenue to be down 8 per cent sequentially.

AMD's total revenue for the first quarter was $1.03bn, which wasn't good – it was a 26.3 per cent decline from last year's quarter. If the firm's second-quarter revenue is closer to $948m, it will be a 34.2 per cent dip from the same period a year ago.

Also, where previously AMD had expected to see gross margin of 32 per cent in the quarter, it now expects its gross margin to be 28 per cent.

It should surprise no one to learn that AMD blames its poor results, at least in part, on "weaker than expected consumer PC demand" – although why it should have expected anything other than weak demand is a bit of a puzzler, because that's been the story of the PC market for the last couple of years, at least.

The company's Computing and Graphics reporting segment will be the hardest hit, it said, while sales for the Enterprise, Embedded and Semi-Custom segment met expectations.

AMD also said it expects to take a one-time charge of $33m related to the cost of transitioning some chip designs from its older 20 nanometer process to the latest FinFET node.

On a positive note, AMD said the results of its efforts to reduce the amount of inventory in the channel have been in-line with its plans.

Still, the lowered guidance wasn't what AMD shareholders wanted to hear, particularly when the chipmaker only has two more quarters to pull itself out of the red on schedule. The predictable sell-off began almost immediately following the announcement, sending AMD's share price down more than 13 per cent in after-hours trading. ®

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