AMD Cuts Q2 Sales Guidance On Weak PC Demand; Stock Plunges

(RTTNews) - Chip maker Advanced Micro Devices Inc (AMD) on Monday said it expects second-quarter revenues to be lower than previously guided, citing pale consumer PC demand hurting its Original Equipment Manufacturer APU sales.

Following the announcement, AMD shares plunged 14 percent in after-hours trade on the Nasdaq.

AMD, based in Sunnyvale, California, now expects second-quarter sales to decline about 8 percent sequentially. Earlier, it expected sales to drop 3 percent, plus or minus 3 percent, sequentially.

Analysts polled by Thomson Reuters currently expect the company to post second-quarter sales of $999.55 million, implying a sequential decline of about 3 percent.

The company now expects adjusted gross margin to be about 28 percent, compared with prior guidance of about 32 percent.

The weaker margin is due primarily to a higher mix of Enterprise, Embedded and Semi-Custom segment sales and lower than anticipated Computing and Graphics segment APU unit volumes, AMD said.

Also, AMD said it expects GAAP gross margin to be further impacted by a one-time charge of about $33 million associated with a technology node transition from 20 nanometer (nm) to FinFET. The company started product designs in 20nm that will instead transition to the leading-edge FinFET node.

The company expects second-quarter channel sales and channel inventory reduction efforts to be in-line with the company's plans.

AMD's sales have consistently faltered; in April, it reported a wider loss for the first quarter amid sagging sales and its shares tanked.

Known for processors used in personal computers, AMD has been hurt by the slowing demand for PCs and notebooks as tablets and smartphones gain prominence.

The company has ceded ground to larger rival Intel Corp (INTC) and also faces competition from Nvidia Corp (NVDA). To prop up, AMD has diversified and currently also makes chips for video game consoles.

AMD will report second quarter results after market close on July 16.

AMD closed Monday at $2.47, down $0.06 or 2.37%, on a volume of 19 million shares on the Nasdaq. In after hours, the stock dropped $0.34 or 13.77% at $2.13.