AMD Swings To Loss, Yet Tops View; Sees Q3 Revenues Above Street

(RTTNews) - Advanced Micro Devices Inc. (AMD) Thursday reported a swing to loss in the second quarter, as the slump in personal computer market continues to hurt its top line coupled with receding gross margin. Nonetheless, loss per share for the quarter was lower than what analysts estimated, with revenues also coming in ahead of Street expectations.

For the past few quarters, revenues at AMD have continued to drop, hurt by slowing demand for PCs and notebooks as tablets and smartphones taking over. For the second quarter, AMD revenues declined 18 percent to $1.16 billion from $1.41 billion last year. Analysts polled by Thomson Reuters expected revenues of $1.11 billion for the quarter.

To a great extent, AMD depends on the performance of the PC industry, as it generates about 80 percent of its revenues from the sales of chips for PCs and notebooks. However, the current preference for tablets and smartphones --which uses chips made by other manufacturers-- have impacted AMD.

Nonetheless, the company has diversified its portfolio and currently make chips for video game consoles in addition to PCs.

AMD is the only significant rival to behemoth Intel Corp. (INTC) in the processor market for personal computers, and provides a cheaper option compared to Intel's processors. Intel, on Wednesday reported its second quarter profit plunged 29 percent hurt by the weak PC market.

According to market research firm Gartner Inc. (IT), worldwide PC shipments in the second quarter fell 10.9 percent to 76.0 million units. Gartner said "This marks the fifth consecutive quarter of declining shipments, which is the longest duration of decline in the PC market's history."

Commenting on the results, Chief Executive Rory Read said, "Our focus on restructuring and transforming AMD resulted in improved financial results. Our performance in the second quarter was driven by opportunities in our new high-growth and traditional PC businesses."

At computing solutions division, which includes microprocessors, sales decreased 20 percent, while revenues from graphics segment that includes video and multimedia products for desktops and notebooks, dropped 13 percent, year-over-year.

Sunnyvale, California-based AMD reported a second-quarter loss of $74 million or $0.10 per share, compared to a profit of $37 million or $0.05 per share last year.

Adjusted loss for the quarter was $0.09 per share, compared to earnings of $0.06 per share a year ago. On average, 26 analysts expected the company to report a loss of $0.13 per share for the quarter. Analysts' estimates typically exclude special items.

Gross margins, or gross profit as a percentage of revenues, dropped to 40 percent from 45 percent last year.

Looking ahead to the third quarter, AMD expects revenue to increase 22 percent, plus or minus 3 percent, sequentially. This translates to revenue expectation of about $1.42 billion for the third quarter. Analysts currently estimate revenues of $1.22 billion for the quarter.

AMD closed Thursday's regular trade at $4.64, up $0.26 or 5.94%, on the NYSE. The stock, however, slipped $0.19 or 4.09%, in the after-hours trade.