Giant chipmaker Advanced Micro Devices (AMD) said on Monday, July 9, that weak sales of PCs in Europe and China, as well as weak PC sales among consumers in general, will affect its sales this quarter. The company said its revenue in the quarter ended June 30 will drop by 11 percent sequentially. AMD had previously estimated its second-quarter revenue to be flat or grow three percent sequentially.
"The lower preliminary revenue results are primarily due to business conditions that materialized late in the second quarter, specifically softer-than-expected channel sales in China and Europe," AMD noted in its preliminary second-quarter results.
The announcement marks another major miss for AMD and its relatively new CEO Rory Read. Back in April, the chipmaker reported a quarterly loss of more than half a billion dollars as the company still carries costs related to the spinoff of its former manufacturing division, now called Global Foundries. In restructuring its relationship with GlobalFoundries AMD had to take a $703 million one-time charge, which caused the loss.
AMD also attributed the worse-than-expected results announced on Monday to a "weaker consumer buying environment impacting the company's Original Equipment Manufacturer [OEM] business." This statement is likely the scariest scenario, as it either means that AMD processors are not doing that well in PCs, or that the consumer market in general for PCs is sluggish as the demand for tablets continues to increase. AMD virtually has no presence in the tablet market, at least not yet. Meanwhile, weak demand in general for PCs could pose major problems for several companies, including rival chip giant Intel and its customers such as Hewlett-Packard (HP), Acer, Dell, and Asus.
"Although we had previewed a miss from AMD, the magnitude exceeded our expectations, reflecting a combination of weak PC market conditions and a degree of share loss to Intel," Citibank's Glen Yeung said in a research note, as cited by CNET. "While discouraging, we suspect 2Q2012 marks the worst quarter of the year, exacerbated by the impact of Intel's Ivy Bridge launch (we do not expect a pre-announcement from Intel)," added Yeung.
