Advanced Micro Devices Inc. (AMD) Thursday reported a decline in second-quarter profit, as revenues and margins dropped reflecting weak demand for PCs and notebooks in China and Europe. Earnings for the quarter were short of estimates by a penny, while revenues were in line with expectations.
AMD's revenues for the quarter decreased 10 percent, with its top line growth heavily dependent on sales of PCs and notebook. Soft market conditions to an extent has impacted the PC industry, with popularity now resting on tablets and smartphones. Worsening economic conditions in Europe and Asia have also impacted profit. AMD competes with much larger rival Intel, which is the world's largest supplier of microprocessors with about 80 percent market share.
Chief Executive Rory Read said, "Overall weakness in the global economy, softer consumer spending and lower channel demand for our desktop processors in China and Europe made the closing weeks of the quarter challenging."
According to research firm IDC, global PC sales in the second quarter edged down 0.1 percent from last year, as demand for smartphones and tablets continued to impact sales with limited demand from channels ahead of new product launches this fall.
Net revenues for the quarter declined to $1.41 billion from $1.57 billion last year. Twenty nine Wall Street analysts on a consensus estimated revenues of $1.41 billion for the quarter.
At Computing Solutions division, which includes microprocessors, sales decreased 13 percent, hurt by lower sales in China and Europe. At Graphics segment revenue that includes video and multimedia products for use in desktop and notebooks, remained flat.
Gross margin, or the percentage of revenues left after subtracting production costs, dropped to 45 percent from 46 percent a year earlier. Excluding certain costs, gross margin was 46 percent, flat sequentially.
Sunnyvale, California-based AMD's second-quarter profit dropped to $37 million or $0.05 per share from $61 million or $0.08 per share last year. Adjusted net income decreased to $0.06 per share from $0.09 per share last year. On average, analysts polled by Thomson Reuters expected earnings of $0.07 per share for the quarter. Analysts' estimates typically exclude special items.
Looking forward to the third quarter, AMD expects revenue to decrease 1 percent, plus or minus 3 percent, sequentially. Analysts currently estimate revenues of $1.50 billion for the quarter.
Looking ahead, Read added, "We are taking definitive steps to improve our performance and correct the issues within our control as we expect headwinds will continue in the third quarter as the industry sets a new baseline."
AMD closed Thursday's trading at $4.86, down $0.03 or 0.61%, on a volume of 26 million shares. In after hours, the stock gained $0.15 or 3.09%.
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