AMD Sales May Miss Estimates as Intel Gains PC Orders

Advanced Micro Devices Inc., struggling to compete with Intel Corp. in personal-computer processors, gave a sales forecast that missed estimates and said it’s cutting 7 percent of its workforce, or about 710 jobs.

Revenue in the current period will decline as much as 16 percent from the third quarter’s $1.43 billion, AMD said today in a statement, indicating sales as low as $1.2 billion. That compares with the $1.48 billion average estimate of analysts, according to data compiled by Bloomberg.

AMD, which named Chief Operating Officer Lisa Su as chief executive officer to replace Rory Read last week, is losing share in processors to Intel as they vie for orders in a PC market that’s on course for its third straight annual drop. Read had bet unsuccessfully that Intel wasn’t interested in the market for processors used in cheaper laptops, where AMD had been relatively successful, said Kevin Cassidy, an analyst at Stifel Nicolaus & Co.

“He miscalculated,” said Cassidy, who has a hold rating on the stock. “AMD used to have pretty good share in sub-$400 notebooks.”

The company, which had about 10,100 employees at the end of the third quarter, said the global job reductions will result in restructuring and impairment costs of about $57 million in the current period, and a charge of $13 million in the first half of 2015. The cuts are projected to be completed by the end of the fourth quarter, and will result in savings of about $85 million next year.

AMD shares fell 4.6 percent in extended trading following the announcement. The stock rose 1.2 percent to $2.64 at the close in New York, bringing its decline to 32 percent for the year.

New Markets

Sunnyvale, California-based AMD said its third-quarter net income was $17 million, or 2 cents a share, compared with earnings of $48 million, or 6 cents, a year earlier. Sales fell 2.2 percent to $1.43 billion from $1.46 billion. Analysts on average had predicted a profit of 3 cents a share on sales of $1.47 billion.

Su will have to speed up AMD’s efforts to expand in new markets where it doesn’t face direct competition from the world’s largest chipmaker, such as chips for game consoles. Her company is the provider of processors for Microsoft Corp.’s newest Xbox and Sony Corp.’s latest PlayStation.

The company had two new design wins, which should bring in about $1 billion of revenue over about three years, starting in 2016, Su said on a conference call with analysts following the announcement. She declined to give more details.

Market Share

Illustrating what AMD is up against, Intel took in 94.7 percent of the revenue in the PC processor market in the second quarter, while AMD garnered 5.2 percent, according to market researcher IDC. Intel’s chips powered 84 percent of desktop units shipped and 88 percent of laptops. By all those measures, AMD lost ground to its larger rival.

Earlier this week, Intel reported third-quarter sales at its PC-processor division rose 8.9 percent to $9.19 billion. The company’s growth in PC chips was led by a 21 percent jump in products for notebook computers. Desktop-chip shipments rose 6 percent, Intel said. That was in a period when global PC unit sales fell 1.7 percent, according to IDC. The researcher still expects shipments to decline for the year.

AMD said revenue from its computing and graphics business fell to $781 million in the third quarter, a decline of 16 percent from a year earlier.

In October 2012, the company announced plans to cut about 15 percent of its staff.

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