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AMD faces revenue gloom

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AMD,
Revenue

Tom Krazit CNET News.com

Published: 07 Jul 2006 09:25 BST

AMD announced its second-quarter revenue figures ahead of schedule on Thursday, and investors are not going to be pleasantly surprised.

AMD's revenue for the second quarter is expected to be $1.21bn, a 52 percent increase compared with the same period last year. However, analysts had been expecting AMD to record $1.3bn in revenue, according to estimates polled by Thomson First Call.

When AMD reported its first-quarter results in April, it said it expected second-quarter revenue to be flat to slightly down, in line with normal seasonal expectations. But $1.21bn in revenue is a 9 percent decrease compared with the first quarter.

Some analysts had fretted about AMD's performance in the face of a price war on Intel's part, as the larger chip company desperately tried to cut inventory ahead of the launch of its new Core architecture chips. AMD said sales of entry-level and mainstream processors for desktops and notebooks were down, the same categories that Intel targeted with its price cuts.

But the PC market, after years of solid gains, might also be finally coming back down to earth, said Dean McCarron, an analyst with Mercury Research. PC shipments grew 13.1 percent in the first quarter, but growth is expected to slow to about 10 percent later this year.

The second quarter is always the slowest quarter of the year for the PC industry, but the typical decline for Intel and AMD is about 2 to 4 percent compared with the first quarter, McCarron said. AMD also tends to feel the effects of a slowdown in consumer purchases more than Intel, which has a disproportionately larger share of the corporate PC market, he said.

AMD's server business, however, continued to post strong sales during the second quarter, the company said. Opteron processor shipments set a record during the quarter, AMD said.

AMD will officially report earnings on 20 July. An AMD representative declined to comment ahead of the official results.