AMD Does a Negative Preannounce of its Second Quarter Results
When the news ain't good, the best thing you can do is to divide the bad news into multiple segments, and that's exactly what AMD did with its pre-announce of weaker-than-expected quarterly results.
Next week will bring us the second quarter earnings from players such as Intel, AMD, Microsoft and others. Just a week after Microsoft announced its "non-cash accounting charge", which will drag down the profit of the company, AMD went through what is called "a negative pre-announce".
The company announced that the revenue for the second quarter (April 1st to June 30th) decreased by around 11% from the first quarter results. When we take the first quarter results into account ($1.59B), it looks like AMD will hover around $1.41 billion mark, without any indication of profit or loss. Previously, the company stated that they expect to see a 3% increase, which means the revenue dropped by as much as 14%. What happened for such a dramatic drop?
The company quoted the following: "The lower preliminary revenue results are primarily due to business conditions that materialized late in the second quarter, specifically softer-than-expected channel sales in China and Europe as well as a weaker consumer buying environment impacting the company's Original Equipment Manufacturer (OEM) business."
Given that AMD is very sensitive to the consumer markets, the problematic economy in China and Europe took a big toll on the company. Good news is that AMD decreased its internal spending to just 605 million dollars, meaning there is around 800 million dollar revenue that could or won't cover for losses. One thing is certain, though. AMD needs to start investing in new business opportunities, otherwise the company risks to continue being under the pressure as chip manufacturer, instead of being a solutions provider.