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Weak economy drags AMD's profit down 40%

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POSTED July 19, 2012 9:43 p.m.

SUNNYVALE  (AP) — Trouble in the global economy dragged Advanced Micro Devices Inc.'s net income down 40 percent in the second quarter, and the world's second-biggest chipmaker warned that revenue will continue to be hurt through the rest of the summer.

"Overall weakness in the global economy, softer consumer spending and lower channel demand for our desktop processors in China and Europe made the closing weeks of the quarter challenging," Rory Read, AMD president and CEO, said in a statement late Thursday.

AMD is the world's No. 2 maker of microprocessors, the "brains" of computers, behind Intel Corp. Read warned that though the company is taking steps to improve its performance, he expects "headwinds" to continue into the third quarter. The maker of about a fifth of the world's computer processors said its gross margin, a measure of profitability, was 45 percent in the quarter, down slightly from 46 percent last year.

Earlier this month the Sunnyvale, Calif.-based company slashed its second-quarter revenue forecast, blaming weaker-than-expected sales in China and Europe and lackluster demand overall from consumers. Some analysts said that the largest issue for AMD, other than simply weak PC demand, is that Intel became very competitive on prices in the second half of the quarter.

AMD's net income tumbled to $37 million, or 5 cents per share, from $61 million, or 8 cents, a year earlier. Excluding one-time charges and gains, the company earned 6 cents per share — narrowly missing analysts' expectations by a penny, according to data provider FactSet.

AMD's revenue also fell 10 percent to $1.41 billion, in line with analysts' revised expectations. The company said computing services revenue fell 13 percent because of lower desktop sales in China and Europe.

AMD said it expects third-quarter revenue to fall by 1 percent to 3 percent from the second quarter, for a range of $1.37 billion to $1.4 billion. Analysts were expecting an increase to nearly $1.51 billion.

AMD's stock fell 4 percent to $4.67 in extended trading Thursday after the results came out. Shares finished the regular session down 3 cents at $4.86. Since trading last fall at a 52-week low of $4.31 the stock recovered to peak at $8.35 early this spring, but has been on a downward trajectory since.

 

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