AMD Revenue Forecast Falls Short of Some Analyst Estimates

  • Stock, which had doubled this year, falls in extended trading
  • Seasonal game console decline pressures fourth-quarter revenue

Advanced Micro Devices Inc., trying to return to sustained profitability, predicted fourth-quarter revenue that will miss analysts’ expectations, hurt by dwindling orders for game console processors.

Key Points

  • Revenue in the fourth quarter will fall 18 percent, plus or minus 3 percent, from $1.307 billion in the previous quarter, the Sunnyvale, California-based company said in a statement Thursday.
  • That indicates sales as low as $1.03 billion and compares with an average analyst estimate of $1.1 billion, according to data compiled by Bloomberg.
  • The net loss in the third quarter was $406 million, or 50 cents a share, compared with a loss of $197 million, or 25 cents, in the same period a year earlier. Sales rose 23 percent to $1.31 billion.
  • The loss was partly caused by a $340 million charge related to a change in a supplier agreement, the company said.

The Big Picture

While Chief Executive Officer Lisa Su has made progress in clawing back orders lost to larger rivals Intel Corp. and Nvidia Corp., her company has become increasingly dependent on orders from Sony Corp. and Microsoft Corp. for custom processors that run game consoles. As demand for the PlayStation and Xbox peak toward the end of the year, AMD’s customers have already built enough devices and inventory to meet that surge and are slowing purchases.

The Details

  • AMD stock has more than doubled this year as improving results convinced some analysts and investors that it will avoid bankruptcy.
  • The stock fell about 6 percent in extended trading Thursday following the report. It had earlier closed up 2.8 percent at $6.96.
  • Earlier this week, Intel stock fell the most in nine months after a disappointing fourth-quarter sales forecast signaled lackluster year-end demand for personal computers and rising inventory.

CEO Interview

  • AMD’s Su said the decline in console chip orders was "normal for this time of year." Unlike larger rival Intel, AMD is seeing no buildup of unused parts in its PC and graphics chip business.
  • The company is on track with its introduction of new PC processor and server chip designs that will debut next year, she said. Prospective customers are pleased with early samples, she also said.
  • “Everyone is focused on our new products and that’s where my focus is,” she said. “We’re executing well.”
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