AMD 2Q sales slump 13 pct, not as bad as Wall Street feared, but stock sinks

Tuesday, July 21, 2009

AMD 2Q sales slump 13 pct, shares dive

SAN FRANCISCO — Advanced Micro Devices Inc. narrowed its loss in the second quarter, even though sales at the chip company slumped 13 percent.

The revenue decline reported Tuesday wasn’t quite as severe as Wall Street had feared. One bright spot was slightly better sales of graphics chips. But falling microprocessor sales overshadowed it. The loss exceeded forecasts, and AMD shares plunged 12 percent in extended trading.

The results demonstrated that the beginnings of a turnaround in the personal computer market, which appears to be benefiting rival Intel Corp., isn’t buoying AMD in the same way.

AMD has struggled for two years to return to profitability, losing billions of dollars in the process. Tuesday’s numbers show AMD has some kinks to work out before it’s able to pull off a full recovery.

One troubling sign: AMD’s gross profit margin is shrinking, while Intel’s is improving. Gross margin is critical for chip makers because it reflects how well they’re controlling costs.

AMD, the world’s No. 2 maker of computer microprocessors after Intel, lost $330 million, or 49 cents per share, in the second quarter. In the same period last year, it lost $1.2 billion, or $1.97 per share.

AMD says its loss was 62 cents per share, when a one-time gain is stripped out. On that basis, analysts had predicted a loss of 47 cents per share, according to Thomson Reuters.

Sales fell to $1.18 billion. Analysts were expecting $1.13 billion.

AMD shares fell 48 cents to $3.60 after the earnings report was released. The stock had closed regular trading at $4.08, down 2.2 percent on the day.

AMD is in the process of a major transformation: It recently spun off its manufacturing arm with the help of the Abu Dhabi government, forming a new company called GlobalFoundries. It was an admission that AMD couldn’t keep up with Intel in the race to build costly, cutting-edge chip factories.

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