AMD exemplifies PC market’s problems

If you want to get a sense of how bad things are in the PC industry right now, take a look at AMD.

In healthy, growing markets, there’s typically room for both smaller companies and dominant players to thrive. Not all that long ago, that dynamic marked the PC industry.

But not now. Mighty Intel, the dominant PC chip maker is stumbling. But things are much, much worse at AMD, which has always been the market’s second fiddle when it came to PC processors.

In the second quarter of this year, AMD’s sales plunged a whopping 35 percent. Meanwhile, its loss swelled by $145 million to $181 million. AMD’s losses for the first half of this year have almost equalled what it posted for all of last year.

The sales decline was expected; AMD warned earlier this month that its sales were going to be below its previous expectations. But on Thursday, the company officials added to investors’ misery by cautioning them that they no longer believe that AMD will be profitable in the second half of this year.

AMD officials blamed the company’s sales shortfall in the second quarter largely on the upcoming release of Windows 10. They and others in the industry have blamed much of the recent sharp decline in PC sales on consumers and enterprises holding off on purchases until after July 29, when Microsoft releases the new version of its operating system.

AMD expects sales to pick-up in the third quarter, with officials forecasting that its sales will grow 6 percent from the $942 million it posted in the just-completed period. But they gave a fairly wide margin of error on that forecast — plus or minus 3 percentage points or $27 million. Even if AMD hits its target, its sales would have fallen by some 30 percent from the same period last year.

What’s more, despite the expected sales pick-up from the second quarter, AMD still expects to post another big loss in the third quarter. The quarterly forecast provided by company officials implies a loss of around $95 million. And that’s using the company’s preferred method of accounting, which doesn’t include a whole host of expenses recognized by standard accounting practices.

Amid all this, AMD is bleeding cash. At the end of the quarter, it had $829 million in cash and marketable securities, which was down from $906 million at the end of the first quarter and more than $1 billion at the end of last year. With the company forecasting that its cash stockpile will drop to around $700 million by the end of the next quarter, it may have to raise cash soon just to have enough money to make the graphics chips it’s committed to manufacturing for the major game consoles, warned Christopher Rolland, a financial analyst who covers the company for FBR Capital Markets, in a research note on Friday.

In spite of all of that, investors seemed more resigned than panicked on Friday. In mid-day trading in New York, AMD’s stock was only off about 4 percent; it was down 8 cents a share to $1.79.

I guess when it comes to the PC market, we’re all getting inured to bad news.

Photo: AMD headquarters in Sunnyvale (Associated Press).

 

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  • d0x360

    Truly unfortunate since AMD is capable of making great hardware. They innovated in the 64bit cpu space, they are pushing new memory technology in the gpu space. They have better price to performance on gpus over nvidia but since nvidia uses underhanded tactics they constantly outsell AMD. Hell the 290x is still a stellar piece of hardware and its been given a boost with the 300 series but nobody seems to care. AMD needs to make a big move. Invest heavy in a powerhouse gpu core paired with hbm and then price it to crush nvidia. The short term losses will be worth the long term effects as it will greatly enhance the brands perception

 
 
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