AMD Climbs Most in 35 Years on China Chip License Agreementby
Struggling chipmaker looking for ways to monetize technology
Company's second-quarter growth forecast spurs stock rally
Advanced Micro Devices Inc. had its biggest increase in more than 35 years Friday after it said it’s licensing technology to a Chinese, state-backed joint venture that will produce server processors for that country’s market.
The company also predicted strong growth in the current quarter. Second-quarter revenue will increase 15 percent, plus or minus 3 percent, from the preceding three months, AMD said in a statement Thursday. That indicates sales of $931.8 million to $981.8 million and compares with an average analyst estimate of $890.8 million, according to data compiled by Bloomberg.
The shares jumped 52 percent to $3.99 Friday, the biggest increase since July 1980, according to data compiled by Bloomberg, bringing the gains for the year to 39 percent. The price was the highest since September 2014.
Chief Executive Officer Lisa Su is trying to turn around the Sunnyvale, California-based company by seeking new markets for its graphics chips and processors and licensing the rights to technology it has already developed. It’s part of her strategy to diversify AMD away from areas where it has struggled to compete against larger rivals, Intel Corp. and Nvidia Corp.
The company believes it clawed back some share in the first quarter in both product areas and projects greater demand for graphics and new orders for custom chips to propel growth in the second quarter, Su said on a conference call with analysts. The company is predicting it will increase total revenue in 2016 even as global shipments of personal computers are expected to fall for a fifth straight year.
“Even in this market there’s an opportunity for us to gain share,” Su said.
AMD will get $293 million as part of the licensing agreement with Tianjin Haiguang Advanced Technology Investment Co., a joint venture overseen on the Chinese side by the Chinese Academy of Sciences. The entity will get processor and system-on-chip technology and design server chips only for the Chinese market.
The world’s most populous country and the biggest market for semiconductors, China is trying to develop a local supply of the key components for everything from smartphones to the most powerful computers. AMD said the agreement won’t affect its efforts to resurrect its presence in the lucrative server market, where Intel has grabbed more than 99 percent share.
AMD’s first-quarter loss was $109 million, or 14 cents a share, compared with a loss of $102 million, or 13 cents, a year earlier. Revenue fell 19 percent to $832 million, failing to reach $1 billion for a second quarter in a row. Analysts had predicted a loss of 15 cents a share on revenue of $819.1 million.