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.

Comments closed
    • destroy.all.monsters
    • 7 years ago

    People love to bash Meyer but he didn’t sell his staff down the river. I agree with Charlie that the board must be replaced – and without a stockholder revolt there will likely be no saving them.

    Read was thought by many to be some much needed fresh air – but he’s just doing the board’s bidding – and apparently it’s the former ATI whose engineers are on the chopping block. Insanity of the highest order when it’s your only significantly profitable division. Yeah that new blood sure did help things!

    Another case of managers protecting their jobs and paychecks at the expense of the company they work for. I can hear the folks pulling for the new team saying “give them time – Read’s not even had a chance to prove himself yet” when he’s had nearly two years to do so – more than enough time for Leo Apotheker to nearly destroy hp.

    If we’re going to focus on results – and what we can do as consumers to keep x86 from being a monopoly, as well as desktop graphics, then we’re going to need to buy AMD product instead of expecting it to be up to intel’s standard. A single vendor for cpus and a separate single vendor for gpus will kill our market dead in no time.

    • sschaem
    • 7 years ago

    AMD is building a reputation under R.Read to miss its targets by massive amount.
    I’m starting to think the CFO didn’t resign, but was pushed out because of this.

    Any other company that miss its own estimate by 10% two quarter in a row (specially when its negative) is going to be crucified. And this seem to have happened to AMD.

    This is normally the best quarter for companies at the source of the supply chain.
    So I cant see AMD continuing on this path in one piece.

    • ludi
    • 7 years ago

    AMD: AMD to shrink faster than expected

      • chuckula
      • 7 years ago

      Unfortunately it’s not AMD to [i<]die[/i<] shrink faster than expected, or they would be in better shape.

    • Silus
    • 7 years ago

    As I’ve been saying for some time (even though these are bad news), these are not the real problems AMD has/had.
    AMD was almost destroyed by extremely poor management for the past 7-8 years and is now just paying the price for so much time being managed by incompetents. And whether some people like to admit or not, buying ATI for that price was what brought AMD to its current situation and all the consequences from it, The exodus of highly competent people from AMD, the layoffs, the lack of strategy for the future doesn’t help any company to survive, much less strive. AMD is setting itself up for grabs for a while now and we just haven’t seen a public offer yet, because no one really wants to buy a sinking ship for the current price. They want it much cheaper.
    When the stock goes below $2 (which isn’t far away) we’ll see offers popping up. I just don’t think it will be for the whole company, but rather pieces of it (namely the graphics division, Qualcomm is definitely interested)

      • BobbinThreadbare
      • 7 years ago

      AMD might have been mismanaged, but I’m pretty sure they were screwed by economic factors they had no control of.

      Basically, there was no way they could have continued financing new fabs with how much they cost. Once you don’t have your own fabs you can’t compete with Intel at the high end, and it’s turning out even the mid-end.

      Unless they had made some kind of super-cooperation deal with a company that could afford fabs like Samsung. That would have been their only hope.

        • blastdoor
        • 7 years ago

        They could have better financed fabs if they hadn’t wasted $5 billion on ATI…

        Having said that, I agree that AMD was going to have a rough time no matter what. Going toe-to-toe with Intel is a very hard thing to do, and a big part of the reason AMD had some success in the early 00’s was because of the triple-play f-up by Intel involving Netburst, IA64, and RAMBUS. Once Intel righted the ship with tick-tock life was going to be harder for AMD no matter what.

        But it didn’t have to be *this* bad.

        And keep in mind that there are companies out there that might have been willing to enter into some cooperative deals with AMD, if only AMD were viewed as more competent. Apple loves writing very big checks to suppliers for exclusive access to products. If Apple thought that AMD could productively employ a few billion dollars, Apple would probably do a deal. But my guess is that Apple (rightly) views AMD (and GloFo) with extreme skepticism. That might have been different if AMD had been better managed.

    • Chrispy_
    • 7 years ago

    AMD Graphics needs to break away from AMD before they get sucked down with the sinking ship.

    It’s bad enough that their lack of performance in the CPU sector means there’s no competition there anymore. If the graphics division gets impacted by the same mismanaged incompetence that has ruined AMD as a processor manufacturer, Nvidia will do the same in the GPU space as Intel are doing in the CPU space; Minor performance updates and barely-changing prices.

      • Alexko
      • 7 years ago

      There’s no way the graphics division could survive on its own. And without integrated graphics, the CPU division would die very quickly too.

      • flip-mode
      • 7 years ago

      The Radeon is on the CPU now. You want to throw that away? It would be a grave mistake to sell the graphics division at this point.

        • Chrispy_
        • 7 years ago

        I’m not talking about AMD selling the graphics division for AMD to survive,

        I’m talking about the graphics division distancing itself from AMD for (the artist formerly known as) ATI to survive.

    • ish718
    • 7 years ago

    Bad Economy+ Intel Anti-Competitive practices+ Bulldozer = bad for AMD

      • xeridea
      • 7 years ago

      I wonder where AMD would be now if Intel didn’t have such dominant marketing and other shenanigans back in the day when they made there PoS P4s for years on end, making them crappier each time, with moar GHz to make the average idiot think they were faster. AMD really had superior chips for years and years, but was unable to capitalize due to Intel being more dominant in the market longer.

        • chuckula
        • 7 years ago

        AMD capitalized just fine when it had the better products. AMD’s own executives bragged about how they were selling every last chip they could manufacture (and then some since the contracted with Chartered). They also sold high-end dual cores like the FX-62 for more money than Intel charges for a 3960x today.

        AMD’s first mistake was pursuing marketshare at all costs, including selling their souls to get Dell as an OEM buying chips at a steep discount when their smaller channel partners had been loyal to AMD for years and had bought chips at full wholesale price. AMD cut off its own air supply in its Dell “victory.”

        AMD’s next big mistake was that instead of taking their profits from the Athlon64 era and plowing it into more production capacity and R&D, instead Hector ran out and paid *way* too much money for ATIbefore he bailed with his golden parachute*. The whole ATI thing could just as easily have been accomplished with an investment of 5% of the purchase price that would have setup a joint venture between two independent companies. Heck, what we call “Llano” could probably have come out *sooner* if it wasn’t for Hector’s ego and determination to get his face plastered over business magazines. Keep in mind that the people at ATI were treated like complete crap by the AMD management, so AMD not only overpaid, but they intentionally drove out a huge number of talented ATI people who now work for competitors…joy.

        Of course, the consequences of Hector’s binge were that AMD had to spin off its fab capacity. People like to blame Intel for this, but unless they believe that AMD’s entire senior management and board of directors are Intel spies, it’s more like AMD had to lie in the bed it made.

        AMD’s third big mistake was that Dirk Meyers had absolutely no ability to perceive any market other than the high-end server market, where Intel has its greatest strengths. He intentionally sold off AMD’s mobile graphics division for pennies to a major competitor and made sure that AMD had no real solutions in the mobile space (part of the “treat ATI like crap” mentality of the AMD old-guard).

        The smartest thing that I’ve seen from Rory Read is that he is *not* trying to wage some “us-vs-them” war against Intel. He’s smart enough to have seen the stupidity of trying to be the “me too!” second-fiddle to Intel, and he is trying to move in directions where AMD can make money instead of trying to play some stupid game of one-upsmanship with a much larger competitor.

        * True story: Hector was making more money annually while AMD was hemorrhaging than Ottellini has ever made annually even when Intel was making record profits.

          • shank15217
          • 7 years ago

          “AMD’s third big mistake was that Dirk Meyers had absolutely no ability to perceive any market other than the high-end server market, where Intel has its greatest strengths”

          totally wrong.. AMD had/has the absolute best chance in the server market against Intel however AMD hasn’t executed well since bulldozer came out last year and they are losing market share like crazy. Dirk’s biggest mistake was to ignore the mobile market and that’s why he was fired. AMD is desperately trying to catch up and its possible they will fail.

          • xeridea
          • 7 years ago

          This to. I always wondered why the mobile graphics division was sold off for so cheap, when at the time I was thinking they had something good, graphics on mobile devices was on the rise, and why sell of so much potential for so cheap? Imageon was it? IIRC it was like $60-80 million. Imagine if they were still in that department, and partnered with ARM early on, or got out mobile chips out sooner (Hondo).

    • bcronce
    • 7 years ago

    NNNOOOOO!!!!!

    If anything bad happens, I hope the graphics division stays around. Intel on its own sounds bad enough, but nVidia also?! There goes the competition.

    • jdaven
    • 7 years ago

    With ARM in place, I am not too worried about the future of the CPU market. What worries me is the GPU market? What would be a good company to pick up AMD’s GPU tech should it go belly up?

      • codedivine
      • 7 years ago

      Well not sure who can buy the current Radeon IP, but there are certainly many other GPU IP vendors such as PowerVR, ARM and Vivante (apart from the integrated ones like Qualcomm and Nvidia).

        • destroy.all.monsters
        • 7 years ago

        None of whom are in the PC space and don’t make actual chips.

      • blastdoor
      • 7 years ago

      Qualcomm might buy it. Or Samsung. Or Apple (note, Apple wouldn’t buy everything, just the bits they like).

      • destroy.all.monsters
      • 7 years ago

      The tech – as in patents? No one in their right mind is going to take on the desktop market. If AMD goes down that in and of itself will signal the end of the desktop market. The risk to benefit ratio is just too high to even bother with. Nvidia and VIA/S3 will be it on the desktop.

      If it’s just the patents I’m sure there will be a bidding war – and given the current climate I’d add Google to blastdoor’s list.

    • colinstu12
    • 7 years ago

    That’s what happens when you randomly chop down the prices of all your products, all the time… just to stay “competitive”

    Intel and nVidia don’t change the prices on their product much if at all at times. That’s because they release newer products that aren’t only faster, but cost the same as before. AMD’s solution of using the same old slow expensive product, and breaking even / selling it at a loss just so they can say “we have fast stuff too!” isn’t the strategy you want if you want to stay in business. Figure out new stuff SOON amd! BD isn’t it!

    • Tristan
    • 7 years ago

    Advanced Micro Disappear

      • dmitriylm
      • 7 years ago

      Well they there Mr. Clever 🙂

      Nah, I’m just kidding, that wasn’t clever at all.

    • Althernai
    • 7 years ago

    I was recently asked to recommend a 13-14 inch laptop the sole purpose of which would be internet browsing, video and maybe very light office work. I figured the Trinity CPUs would be ideal for this since they’re cheap and more than powerful enough… but good luck finding a Trinity laptop with an SSD and a decent display. I wound up recommending an ultrabook even though it’s considerably more expensive.

    AMD’s problem is that their chips do not stand alone. Intel has the same exact problem and they’ve been trying to solve it for quite some time now by pushing their hardware partners towards the usage of something other than the cheapest piece of junk that fulfills any given function. They’re not entirely successful, but are much more so than AMD which is forced to sell its chips paired with cheap trash. There’s just no way to squeeze decent margins out of that situation.

      • chuckula
      • 7 years ago

      You raise an excellent point: Notebook Trinity chips can be pretty nice, but AMD is intentionally targeting them for lower-end notebooks that are going to end up with the lousy keyboards, 1366×768 screens, etc. etc.

      You might say: Well, just put Trinity into a high-end form factor. Sure you could do that and trim the end-price a little bit compared to an Intel equivalent, but then Trinity’s weaknesses would start to be more pronounced in a product that doesn’t have anywhere near the price differential to make it attractive to consumers.

        • xeridea
        • 7 years ago

        Ummm, I don’t know where you have been the last several years, but 99% of laptops sold today or 1366×768, not because there isn’t demand for better, but laptop makers refuse to make better ones for under $1000. This isn’t just AMD. I would be 300 times more tempted to buy a laptop if any of them was worth anything, but they are mostly all junk due to crappy screens. And ultrabook keyboards are crap, I much prefer your standard variety.

          • chuckula
          • 7 years ago

          [quote<]And ultrabook keyboards are crap[/quote<] Says someone who's probably never touched one. Will you change your tune about the keyboard if we slap in an AMD chip and call it an "ultrathin"? I've only ever found two models that were listed for sale, and while they were cheaper than high-end ultrabooks they weren't any cheaper than low-end ultrabooks that came with basically the same build quality and features.

      • xeridea
      • 7 years ago

      Umm, so you ended up recommending an $800 ultrabook when you could just get a $4-500 laptop and switch out for SSD for ~60, then selling HDD? SSD helps a lot in boottime, esp for laptops, but I just leave on standby, and rarely worry about boot time on my low end laptop wife uses for school. I wouldn’t recommend paying twice as much for a few seconds off boot time, esp when you can switch drive for nearly free.

        • Althernai
        • 7 years ago

        Actually, I pointed them to a bunch of things and the one they liked best was $1100. And yes, if *I* was buying a laptop, I would buy the SSD separately… but I am in Europe for at least the next few months and they’re in the US (and no, swapping laptop storage is not something they’re able or willing to do). Also, the hard drive is only part of the problem — the other part is the display and that even I would not be comfortable swapping.

        EDIT: Thinking about this some more, it kind of illustrates the problem better. Yes, if you’re willing to tinker with your machine, you can get a lot of value out of AMD. However, how many people are willing and able to do that? I think that most people with the money to pay for high-margin products would prefer to buy something that works the way they want it to right out of the box, without having to mess with it. Tech enthusiasts are the exception to this, but there aren’t enough of us for it to drive the general trend.

      • brucethemoose
      • 7 years ago

      Why would you get your friend an ultrabook?

      Unless your friend has a fetish for thin laptops, there are much better alternatives for the $$$.

        • Althernai
        • 7 years ago

        It’s not particularly thin or particularly light for a 14″ laptop. It even has an internal optical drive. I’m not sure why it’s called an ultrabook — I think that word basically applies to every laptop with a low-voltage Intel CPU.

    • Price0331
    • 7 years ago

    I’m interested in seeing if AMD, after all of these losses over the years, will become a GPU only manufacturer, and will sell it’s liscenses/processor division to someone else. It would have to be a U.S. company due to patent restraints I believe, maybe Texas Instruments?

    /end probably completely inaccurate speculation

      • destroy.all.monsters
      • 7 years ago

      No, no and no. AMD will live or die in its current form. x86 doesn’t transfer. If AMD goes down the desktop will follow it (due to intel and Nvidia price gouging in part).

    • tfp
    • 7 years ago

    Odd it’s like their chips cost to much to make and under perform so they have to sell them for cheap.

    • NeelyCam
    • 7 years ago

    [quote<]AMD blames an "inventory write-down of approximately $100 million due to lower anticipated future demand for certain products."[/quote<] Ah - a one-time charge. AMD is still [i<]very profitable[/i<] - it's just that pesky one-time charge that keeps popping up.. [quote<]Third quarter gross margin was also negatively impacted by weaker than expected demand, which contributed to lower than anticipated average selling prices (ASPs)[/quote<] Blaming the economic downturn is one thing, but if ASPs are dropping a lot and are causing a major drop in gross margin, it sounds more like the products aren't competitive at performance/cost. This has gotten really bad ever since AMD switched to GloFo 32nm.

      • Action.de.Parsnip
      • 7 years ago

      I’d really like to know which “certain products” these actually were. GPUs? Llano’s? Bulldozers? :-S

        • Vasilyfav
        • 7 years ago

        AMD’s desktop lineup is either not competitive (Bulldozer&Piledriver) or tries to fill a niche that doesn’t exist (Trinity).

        I mean it’s pretty evident from most benchmarks that AMD’s GPUs (both embedded and discreet) are much more competitive than their CPU parts in both performance and power consumption.

          • chuckula
          • 7 years ago

          AMD: A first rate graphics company with a perennially under-performing CPU division.

        • link626
        • 7 years ago

        all of the above.

        llano less so than trinity.

        that’s my bet anyway.

      • I.S.T.
      • 7 years ago

      That one time charge was due to the poor sales, so…

      As for weaker than expected demand, that’s pretty blatantly a reference to BD and Llano underperforming, as well as the weaker brand their GPU stuff has(Regardless of its quality, folks, before people start calling me a fangirl).

        • Alexko
        • 7 years ago

        To be fair, the global PC market has slowed down this year, which wasn’t anticipated. That sort of thing does tend to not only hurt unit sales, but ASPs as well.

        Of course, AMD’s CPU division isn’t doing very well, but it’s not the only reason.

    • Unknown-Error
    • 7 years ago

    OUCH! This is depressing…

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