AMD Pulls Up Short
As Advanced Micro Devices' (AMD) CEO Hector Ruiz continues struggling for customers in a cut-throat battle with archrival Intel (INTC), the computer chip maker announced on Mar. 5 that it won't likely meet an earlier forecast of $1.6-$1.7 billion in revenue during the first three months of 2007, according to a statement from the company. Investors sold the stock to a new low for the year after the news.
It's not the first time AMD's sales have left more to be desired. Late on Jan. 11, for example, AMD announced disappointing revenue during the three month period ended Dec. 31, explaining that profits took a hit even as sales gained (see BusinessWeek.com, 1/12/2007, "AMD Skids Amid Lower Forecast").
The company continues pulling itself together after taking steps like the $5.4 billion acquisition of ATI Technologies in late October, a deal aimed to combine AMD's microprocessors business with ATI's in graphics, chipsets and consumer electronics.
"AMD has been undergoing a complicated integration with recently acquired ATI Technologies, and we think may have faced difficulties executing as a result,” Standard & Poor's equity analyst Clyde Montevirgen said in a research note Mar. 5. "Given expected market share losses and potential pricing pressures, we remain concerned about near-term growth.” (S&P, like BusinessWeek.com, is owned by The McGraw-Hill Cos.)
Ruiz continues going full throttle to beat his rival to customers. In May, for example, he put up digital billboards that tally what AMD says is the amount of money spent on electricity bills by companies running Intel-based servers. AMD processors have been using less power than Intel's, according to Nathan Brookwood, head of market research outfit Insight64. But Intel's CEO Paul Otellini promised improvements in power consumption in April (see BusinessWeek.com, 5/3/06, "AMD Sticks It to Intel - Again").
Time will tell who wins such battles long-term. "The pricing environment is very competitive. It has been for quite some time, and we expect that to continue," Ruiz said at the Morgan Stanley Technology Conference on Mar. 5, according to Reuters.
So, apparently, did investors. They had sold shares by 1.6% to $13.96 per share in early afternoon trading on the New York Stock Exchange. The stock had hit a new low of the year earlier March 5 at $13.53 on the NYSE.