Advanced Micro Devices Inc. (AMD:US) fell to the lowest price in almost three years after predicting a revenue decline amid market-share losses and diminished demand for personal computers.
AMD shares (AMD:US) dropped 13 percent to $4.22 the close in New York, the lowest closing price since September 2009. The stock has lost 22 percent this year. Shares of chipmaker Freescale Semiconductor Ltd. and Rambus Inc. (RMBS:US), which handles chip design, also declined.
Demand for AMD’s products is being hurt by slower growth in China, the second-largest economy, and a worsening economic climate in Europe, the company said. AMD, the second-biggest maker of processors for PCs, also lost market share to Intel Corp. (INTC:US), which reported growth from the first quarter, according to AMD Chief Executive Officer Rory Read.
“Our performance in the quarter was disappointing and did not meet our commitments,” Read told analysts on a conference call. “It is clear that the overall PC market experienced softness.”
Third quarter sales will be down 1 percent, plus or minus 3 percent, from the prior period, AMD said yesterday. At the low end, that prediction indicates revenue of $1.36 billion in the third quarter, compared with the average analyst estimate of $1.41 billion, according to data (AMD:US) compiled by Bloomberg.
AMD’s sales have grown 14 percent on average from the second quarter to the third over the past 10 years, according to Mike Burton, an analyst at Northland Capital Markets.
Market share losses in notebooks and a lack of demand for AMD’s new server products, which would improve its profitability, prompted Wedbush Securities analyst Betsy Van Hees to lower her rating on the stock to neutral from outperform, she said in a research report today.
MKM Partners LLC’s Daniel Berenbaum, who has a sell rating for AMD, said the earnings report shows that poor execution and a wider market share loss than he had expected.
“Investors seemed willing to give CEO Rory Read the benefit of the doubt, but one year into his tenure it is becoming increasingly difficult to believe that a fix can be arrived at by simply ‘‘improving execution,’’ Berenbaum said in a report today.
Last year, AMD suffered a steeper decline in orders than it had expected because of a failure to supply new chips to distributors. Those customers now need to be persuaded that AMD will now deliver on its supply commitments and that its new products are attractive, compared with the competition, Read said yesterday.
In the second quarter, AMD posted a profit of $37 million, or 5 cents a share, down from $61 million, or 8 cents, a year earlier, the Sunnyvale, California-based company said in a statement.
Sales fell 10 percent to $1.41 billion. In April, the company had predicted a gain of as much as 6 percent from the first quarter.
Freescale Semiconductor (FSL:US), a maker of chips used in cars and phone systems, tumbled 6.5 percent after the company forecast third-quarter revenue that missed analysts’ estimates.
The stock fell 6.5 percent to $9.55 at the close in New York, its biggest decrease since April 20. Shares of the Austin, Texas-based company has declined 25 percent this year.
Third-quarter revenue will be $955 million to $1.01 billion, according to a company statement yesterday. That compared with an average estimate of $1.05 billion, according to data compiled by Bloomberg.
Sunnyvale, California-based Rambus Inc., which designs computer-memory chip interfaces, fell the most since November after reporting that its second-quarter net loss tripled to $32.2 million as sales slid 15 percent to $56.2 million.
Results are suffering from lower technology licensing rates as demand for computer memory ebbs, according to a report by BWS Financial Inc. analyst Hamed Khorsand.
The stock (RMBS:US) plummeted 18 percent to close $4.30, bringing the drop for the year to 43 percent.
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