AMD Joins Chorus of Revenue Warnings

Chipmaker Advanced Micro Devices on Thursday warned fourth-quarter revenue would be much weaker than expected due to widespread weakness, and particularly among consumers.

But shares recovered some of an 8 percent, premarket drop as investors and analysts, by now accustomed to the steady drum beat of bad technology news, seemed unfazed by the warning. And while shares of the Sunnyvale, Calif.-based AMD closed down 5.45 percent at $2.19, shares were trading up two cents in aftermarket trading

Cody Acree, an analyst with Stifel Nicolaus, said the market was not surprised given the state of the PC industry, which is being crippled by poor demand. AMD (NYSE: AMD) and chief rival Intel, the world’s largest chipmaker, make virtually all the microprocessors for the world’s 1 billion PCs.

Acree said AMD has done a solid job of making itself more competitive with Intel (NASDAQ: INTC). “I think this has nothing to do with AMD individually, this is fully macro,” Acree said.

AMD said it now expects revenue from continuing operations for the period ending Dec. 27 to decline around 25 percent from the third-quarter to roughly $1.19 billion.

The average analyst revenue estimate for the fourth-quarter is $1.52 billion, according to Reuters Estimates.

AMD previously forecast fourth-quarter revenue to be flat when compared with the third quarter.

In addition, at an analysts’ meeting gathering in November, AMD stood by its financial forecast, even after Intel slashed its fourth-quarter outlook. Earlier in the month, the company slashed 500 jobs from its staff of 15,500 in a cost-cutting move.

More worries about chips

The chip sector is starting to feel more severe fallout from the global economic slowdown, as businesses cut costs and lower technology spending, and consumers decide to hold off on new purchases.

The Philadelphia semiconductor index, which tracks chip companies, fell nearly 4 percent following AMD’s announcement, although major chip names were mixed. Intel fell more than 4 percent, but shares of Applied Materials (NASDAQ: AMAT), the No. 1 chip equipment maker, rose 5 percent. Meanwhile, shares of graphics chipmaker Nvidia (NASDAQ: NVDA) dropped 4 percent.

Craig Berger of FBR Capital Markets said AMD’s warning highlights new concerns about Intel.

“The magnitude of AMD’s miss obviously raises the risk that Intel will also preannounce revenue worse than its already revised range,” he wrote in a research note.

Jon Peddie of Jon Peddie Research said all tech companies are going to suffer in the current climate, so he was not concerned AMD had unusual problems.

“How could they [AMD] defy gravity and no one else do it? It’s not shocking or worrisome, actually.”

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