AMD: Macroeconomic Situation in the World Slowing Down Microprocessor Business

AMD Blames Global Economic Situation, Low Demand for Llano for Slowing Sales

by Anton Shilov
07/19/2012 | 10:44 PM

Advanced Micro Devices said that the global macroeconomic situation has clearly affected sales of personal computers and hence AMD's revenues. In addition, AMD noted lower channel demand for its desktop A-series "Llano" accelerated processing units in China and Europe due to lack of mainboards. The company indicates that both macroeconomic challenges and issues with the channel will continue to affect it materially in the coming quarter.


"It is clear that global economic activity is slowing, and this is impacting the PC market. For the first time since 2001, client PC shipments have declined sequentially for three consecutive quarters and have been below historical averages for the last seven quarters. We expect macro headwinds will continue for the third quarter. We also believe the PC industry may be resetting to a new baseline and that full year industry growth estimates will be reduced," said Rory Read, chief executive officer of AMD, during conference call with financial analysts.

AMD today announced revenue for the second quarter of 2012 of $1.41 billion, down 11% sequentially, net income of $37 million, or $0.05 per share, and operating income of $77 million.

Computing solutions segment - which includes sales of APUs, CPUs and chipsets - revenue was $1.05 billion, down 13% sequentially driven primarily by lower channel sales in China and Europe as well as a weaker consumer buying environment impacting sales to OEMs. Client product revenue declined 13% sequentially primarily due to a lower ASP as well as declines in unit sales of A-series "Llano" APUs as the company has failed to ensure proper supply of FM1 mainboards into the channel as it had concentrated on shipments to OEMs till early this year. Therefore, when it started to ship Fusion "Llano" into the channel, the demand was weak due to low availability of mainboards. Unit shipments of AMD Opteron processors for servers also dropped quarter-over-quarter. Computing solutions operating income was $82 million, down $42 million from the previous quarter.

Graphics segment revenue was $367 million, seasonally down 4% compared to the prior quarter. GPU revenue was down in a seasonally down quarter due to lower unit shipments in the channel and game console royalty revenue was flat compared to the prior quarter. GPU ASP was flat compared to the prior quarter. Graphics segment operating income was $31 million, down $3 million from the prior quarter primarily due to the seasonal decline in revenue.

“We are taking definitive steps to improve our performance and correct the issues within our control as we expect headwinds will continue in the third quarter as the industry sets a new baseline. We remain optimistic about our core businesses as well as future opportunities with our competitively differentiated next-generation accelerated processor units (APUs). Our recently launched Trinity APU continues to gain traction with customers. We are committed to driving profitable growth," said Mr. Read.

AMD expects revenue for Q3 2011 to decrease 1% sequentially, +/- 3%. The company expects gross margin to be approximately 44%. Operating expenses are expected to be approximately $560 million.