AMD Profit Exceeds Analysts’ Estimates, Lifted by New Chips

Advanced Micro Devices Inc. (AMD), the second-largest maker of processors for personal computers, reported first-quarter profit that beat analysts’ predictions, citing demand for its new chips.

Excluding some costs, profit was 8 cents a share in the period, the Sunnyvale, California-based company said today in a statement. Analysts had projected 6 cents, according to data compiled by Bloomberg. Sales rose 2.5 percent to $1.61 billion, in line with estimates.

While AMD’s outlook for this quarter wasn’t as rosy as that of its larger rival Intel Corp. (INTC), it benefited from demand for the first version of its Fusion chips, which add graphics capabilities that competing products lack. Margins held up as the company kept costs in check, said Srini Pajjuri, an analyst at Credit Agricole Securities in San Francisco.

"What matters is the revenues and gross margins and the guidance," Pajjuri said. "All three of those items are pretty much in line."

AMD expects revenue to be unchanged to about 5 percent lower in the current period, interim Chief Executive Officer Thomas Seifert said on a conference call. Intel, which reported first-quarter results on April 19, issued a sales forecast for the current quarter that surpassed analysts’ predictions.

“There was some hope that AMD may be able to follow in Intel’s footsteps,” said Cody Acree, an analyst at Williams Financial Group in Dallas. He recommends buying the shares, which he doesn’t own. “It’s a disappointment only in the fact that Intel heightened expectations.”

Sales Forecast

AMD’s revenue forecast indicates sales of $1.53 billion to $1.61 billion, compared with the average analyst estimate of $1.59 billion in a Bloomberg survey.

Shares were little changed in late trading. They had risen 8 cents to $8.71 at 4 p.m. in New York Stock Exchange composite trading. AMD has climbed 6.5 percent this year.

AMD’s first-quarter profit was boosted by a one-time gain related to its holdings in chip manufacturer Globalfoundries Inc. Net income was $510 million, or 68 cents a share, almost double the $257 million, or 35 cents, reported a year earlier.

Gross margin, or the percentage of revenue remaining after deducting the costs of production, was 43 percent in the first quarter. That’s down from 47 percent a year earlier.

Excluding certain costs, gross margin was 45 percent, AMD said. On that basis, the company expects gross margin to widen by about one percentage point this quarter, Seifert said.

CEO Search

“We have climbed to a high level on the market share side,” Seifert said on a call with analysts. “The focus is now to make sure that profitability moves in the right corner, too.”

Seifert is running AMD while the company looks for a permanent replacement for Dirk Meyer, who resigned in January after a dispute with the board over strategy. Seifert, the company’s chief financial officer, said he doesn’t want the top position permanently.

AMD’s board is currently interviewing candidates for the position and hasn’t set a time frame for naming a new CEO, Seifert said on the call.

PC sales declined 3.2 percent last quarter, defying projections that the market would grow, according to research firm IDC. While shipments of PC components were lower than expected in the first two months of the year, they rebounded in March, according to Krishna Shankar, an analyst for ThinkEquity LLC in San Francisco.

“March was very strong compared to February,” said Shankar, who recommends buying AMD shares and Intel shares. He doesn’t own either stock.

In recent years, AMD has converted itself into a chip- design company, rather than a manufacturer. It sold its factories to the government of Abu Dhabi, which used then to create Globalfoundries, a company that now makes AMD’s chips.

To contact the reporters on this story: Ian King in San Francisco at ianking@bloomberg.net; Douglas Macmillan in San Francisco at dmacmillan3@bloomberg.net

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