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Processor-maker AMD predicts sales will fall

Demand for PCs dragged down by a slowing economy

Gulf News

San Francisco: Advanced Micro Devices Inc, the second-biggest maker of processors for personal computers, predicted sales will decline as much as 4 per cent in the current period as demand for PCs is dragged down by a slowing economy.

The company said sales will be down 1 per cent, plus or minus 3 per cent, in the third quarter from the second. At the low end, that prediction indicates revenue of $1.35 billion (Dh4.95 billion) in the third quarter, compared with the average analyst estimate of $1.41 billion, according to data compiled by Bloomberg. AMD’s sales have grown 14 per cent on average from the second quarter to the third over the past ten years, according to Mike Burton, an analyst at Northland Capital Markets.

Demand for AMD’s products is being hurt by slower growth in China, the second-largest economy, and a worsening economic climate in Europe, the company said earlier this month when it reported revenue was lower than it had earlier predicted. The company also lost market share to rival Intel Corp., which reported growth from the first quarter, according to AMD chief executive officer Rory Read.

“Our performance in the quarter was disappointing and did not meet our commitments,” Read told analysts on a conference call. “It is clear that the overall PC market experienced softness.”

AMD shares fell as much as 7.4 per cent in extended trading following the announcement. The stock had earlier fallen 3 cents, or 0.6 per cent, to $4.86 at the close in New York.

Conservative forecast

AMD is being conservative in its forecasts for the current period after missing its targets for the second quarter, according to Cody Acree, an analyst at Williams Financial Group. Investors want to see the company consistently deliver on its promises before they will consider the stock, he said.

“They’ve given themselves some buffer here and rightfully so,” said Dallas-based Acree. “We just need to get a couple of consistent quarters.”

AMD suffered a steeper decline in orders than it had expected because of a failure to supply new chips to distributors last year. Those distributors need to be persuaded that AMD will now deliver on its supply commitments and that its new products are attractive, compared with the competition, Read said.

In the second quarter, AMD posted a profit of $37 million, or 5 cents a share, down from $61 million, or 8 cents, a year earlier, the Sunnyvale, California-based company said in a statement.

Sales fell 10 percent to $1.41 billion. In April, the company had predicted a gain of as much as 6 per cent from the first quarter.