UPDATED 06:00 EDT / OCTOBER 12 2012

NEWS

AMD Announces Third Quarter Slump, Blames Lower Demand

Chipmaker AMD has slashed its third quarter revenue outlook for a second time, warning that it faces weaker demand across all product lines than it had first expected. It put down the lack of demand to what it called a “challenging macroeconomic environment.”

Not everyone is surprised by the news, as many analysts had already raised doubts about the chipmaker’s earlier forecasts. Indeed, AMD had already revised its third quarter outlook once in the past, following the announcement of its second quarter results, while Intel has already warned that things are not looking good at the moment.

According to its latest forecast, AMD is now expecting a 10% drop in its revenues from the previous quarter, which is a fairly significant drop from its previous guesstimate that revenues would only fall by around 1%.

It’s not hard to see why chipmakers have been performing so badly lately – with the widely anticipated upgrade to Windows 8 just around the corner, PC sales have slumped fairly dramatically, with Lenovo alone out of the top five PC makers the only one to record improved sales this quarter.

AMD’s gross margin for the third quarter is expected to be around 31%, far below its original projection of 44% made during its last notice. One reason for this is that the firm is being held back by a mountain of excess inventory – the company said that it will have to take a write-down of almost $100 million on its inventory, thanks to “lower than expected future demand”. It also said that its revenues had been hit by lower than expected sales prices on certain products, further dampening its outlook.

The news follows the decision last month by company CFO Thomas Seifert to quit AMD, an announcement that saw its share price tumble below the $3 mark.

It’s not all doom and gloom for the chipmaker however; while it’s always played second fiddle to rival Intel, AMD is believed to be ahead in the mobile space at least, and has high hopes for the success of the Hondo processor chip its designed for Windows 8 devices.


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