Effingham Talk

Advanced Micro Devices Inc. (AMD), the
second-largest maker of processors for personal computers,
forecast lower sales than some analysts had estimated, hurt by
supply shortages and slower demand for PCs.

First-quarter sales will decrease as much as 11 percent
from the previous three months, the Sunnyvale, California-based
company said today in a statement. That indicates revenue of as
little as $1.5 billion, compared with the $1.6 billion average
estimate of analysts surveyed by Bloomberg.

PC component makers are still reeling from last year’s Thai
floods, which cut production of disk drives and rippled through
the industry. AMD also has to contend with shortages of its own
parts because of production snags at its chip supplier,
Globalfoundries Inc. The constraints are worsening the effects
of already-weak consumer spending on electronics, said Chris Caso, an analyst at Susquehanna International Group.

“Overall demand for PCs has been sluggish,” said Caso,
who had projected a 10 percent sequential decline in AMD sales
in the first quarter. The New York-based analyst has a
“neutral” rating on AMD shares, which he doesn’t own.

AMD shares fell 2 percent in extended trading. The stock
had risen less than 1 percent to $6.53 at the close in New York.
AMD has gained 21 percent this year on speculation that new
chips would help it take market share from Intel Corp. (INTC) in laptop
computers.

Net Loss

The company reported a fourth-quarter net loss of $177
million, or 24 cents a share, compared with a profit of $375
million, or 50 cents, a year earlier. AMD booked an expense of
$98 million for its plan to reduce its workforce by about 10
percent. The chipmaker also wrote down the value of its stake in
Globalfoundries by $209 million. Excluding one-time items,
profit was 19 cents a share, compared with an average analyst
estimate of 16 cents.

Sales rose 2.5 percent to $1.69 billion in the period.
Gross margin, or the percentage of sales remaining after
deducting the cost of production, was 46 percent. That compares
with 45 percent in the fourth quarter of 2010.

AMD’s computing-chip revenue rose 7.4 percent to $1.31
billion in the quarter, helped by a surge in server-processor
sales. Its graphics-chip business declined 9.9 percent, the
company said. At the end of the quarter, AMD had $2.02 billion
in long-term debt and $1.91 billion of cash, an increase of $57
million from the previous period.

Chief Executive Officer Rory Read said the shortages of
disk drives hurt sales of graphics cards in the fourth quarter
and will continue to limit shipments in the current period.
AMD’s own supply issues are improving week by week, he said on a
conference call with analysts.

To contact the reporter on this story:
Ian King in San Francisco at
ianking@bloomberg.net

To contact the editor responsible for this story:
Tom Giles at tgiles@bloomberg.net.

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