Advanced Micro Devices Inc. (AMD:US), the second-largest maker of processors for personal computers, cut its third-quarter revenue forecast, citing weak demand across all product lines in a challenging economic environment.
Revenue will drop approximately 10 percent from the prior period, more than the decline of about 1 percent that AMD had previously projected, the Sunnyvale, California-based company said yesterday in a statement. The new forecast indicates sales of about $1.27 billion. Analysts predicted $1.38 billion, the average of estimates compiled by Bloomberg. The stock slumped (AMD:US).
AMD joins other makers of computer components suffering fallout from sluggish growth and a shift in consumer tastes toward mobile devices, away from traditional desktop and laptop machines. The forecast revision follows the resignation, announced last month, of Chief Financial Officer Thomas Seifert.
“AMD’s competitive position is so much weaker than in the past,” said Patrick Wang, an analyst at Evercore Partners Inc. (EVR:US) “When demand declines, AMD is the first to go.”
AMD shares fell 14 percent to $2.74 at the close in New York, the biggest plunge in more than three years. The stock has lost 49 percent this year. Standard & Poor’s placed the company’s BB- rating on watch for a possible downgrade today.
In the third quarter, total global PC shipments fell 8.3 percent from a year earlier to 87.5 million, market-research firm Gartner Inc. said earlier this week.
AMD is also struggling with market-share losses to bigger competitor Intel Corp. (INTC:US) Even so, the company’s difficulties are part of a larger slowdown in the chip market. Intel last month slashed its own third-quarter sales forecast, and is on pace for a sequential decline in third-quarter sales for the first time in two decades.
PC makers are reducing orders for chips at a time of the year when they normally buy more ahead of the holiday season. The weakness is more surprising considering that later this month Microsoft Corp., the biggest software maker, is releasing a new Windows operating system, which usually spurs PC purchases.
The computer-processor industry is in the midst of one of the worst periods in the past two decades, estimates Dean McCarron an analyst at Cave Creek, Arizona-based Mercury Research.
According to McCarron, computer-processor industry sales have posted as steep a decline only twice before in 20 years: in 2000, amid the bursting of the dot-com bubble, and in the fourth quarter of 2008, after the financial meltdown.
Applied Materials Inc. (AMAT:US), the largest producer of chipmaking equipment, in August gave a forecast for fiscal fourth-quarter sales that was less than analysts had estimated. The company said last week it will cut as much as 9 percent of its workforce. Disk-drive makers Seagate Technology Plc (STX:US) and Western Digital Corp. (WDC:US) have also said demand has been worse than projected.
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