Earnings Preview: AMD looks back at a rough 1st quarter
Tuesday April 15, 4:37 pm ET
AMD expected to announce poor 1st-quarter sales amid processor problems and soft economy
NEW YORK (AP) -- Advanced Micro Devices Inc. reports earnings for the fiscal first quarter on Thursday. The following is a summary of key developments and analyst opinion related to the period.
OVERVIEW: AMD ended its fourth quarter with a narrower loss than analysts expected and showed signs of driving down costs. Its shares jumped more than 10 percent when the results were released, but investors were soon selling.
Fitch Ratings downgraded its AMD issuer default rating in January because of the company's operating performance and limited financial flexibility.
AMD banked on its new Barcelona processor chip, announcing that it had shipped more than 100,000 units in December.
The numbers were nowhere near enough to give Wall Street lasting confidence, especially as economic conditions tightened.
In early February, Wedbush Morgan Securities analyst Steven Park noted slowdowns in key AMD consumer markets such as notebook computers, while Dell announced it would stop selling most AMD-based machines on its web site.
Wall Street remained pessimistic, and downgrades and negative comment continued throughout the quarter as the company struggled with glitches and delays.
Shortly after the quarter closed, AMD announced it will jettison 10 percent of its work force and warned investors that first-quarter sales would be lower than it initially expected.
BY THE NUMBERS: Analysts polled by Thomson Financial expected AMD to ring up $1.61 billion in sales; the company said in April that sales for the quarter ended March 29 were closer to $1.5 billion, a 15 percent drop from the year-ago period.
Analysts have since dropped their estimates in line with AMD's comments.
ANALYST TAKE: UBS analyst Uche Orje said in an interview that he had a largely negative view of the stock and said it was being hit by a "double whammy" of market share loss to Intel Corp. and economic weakness. "It is 100% a consumer company so the economy is a big problem," he said.
Orji said that although the company's Barcelona chip could help, too much has gone wrong for positive results this quarter. "It will take a lot to turn things around," he said, noting that AMD will most likely report in line with the sales warning it issued.
WHAT'S AHEAD: The company's performance over the next two quarters could be overshadowed by its drastic cost-cutting measures. AMD said it will cut 10 percent of its work force (1,600 to 1,700 workers) by the end of its third quarter.
Analysts will also be looking for the mass release of the long-awaiting Barcelona processor chip, which so far has only been released for select markets.
STOCK PERFORMANCE: AMD shares fell 21 percent in the quarter to finish out at $5.91.
