AMD: Revenue, margin to shrink more than expected

Alas, poor AMD. We already knew PC shipment forecasts for the third quarter weren't looking too good. Now, AMD has announced that its third-quarter revenue and margin will both be lower than anticipated—quite substantially so, in fact.

AMD previously expected its revenue to decrease by "1 percent, plus or minus 3 percent" from the second quarter to the third. Now, AMD says Q3 revenue will be down "approximately 10 percent sequentially." The chipmaker also warns that its gross margin is going to be "approximately 31 percent," well below the previous forecast of around 44%.

As you'd expect, AMD says sluggish market conditions led to the revised estimates. The company bemoans "weaker than expected demand across all product lines caused by the challenging macroeconomic environment." Addressing the huge gross margin slump, AMD blames an "inventory write-down of approximately $100 million due to lower anticipated future demand for certain products." The chipmaker goes on to say:

Third quarter gross margin was also negatively impacted by weaker than expected demand, which contributed to lower than anticipated average selling prices (ASPs) for the company's Computing Solutions Group products and lower than expected utilization of its back-end manufacturing facilities.

This will be the second time in a row AMD misses estimates this year. After posting a net loss in Q1, the company said Q2 revenue would go up by "3 percent, plus or minus 3 percent." However, Q2 revenue actually ended up declining by 11%. The fact that AMD's third-quarter sales will be so much lower than the already lower-than-anticipated Q2 results definitely seems like bad news for the company.

We'll find out the full extent of the damage on October 18, in any case. That's when AMD plans to disclose its full third-quarter results to the public.

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