July 6, 2015 / 8:37 PM / 2 years ago

Chipmaker AMD cuts revenue estimate, citing weak PC sales

(Reuters) - Chipmaker Advanced Micro Devices Inc lowered its revenue estimate for the second quarter, below analysts’ average estimate, saying the demand for personal computers was weaker-than-expected.

AMD’s shares fell as much as 15 percent to $2.10 in extended trading, after the company also cut its adjusted gross margin forecast for the quarter ended June 27.

“They are going through a big transitions. It’s not a one quarter turnaround story, it’s going to take multiple quarters for the vision to come to fruition,” Wedbush Securities analyst Betsy Van Hees said.

The company has been shifting focus to gaming consoles and low-power servers but progress has lagged Wall Street’s expectations due to intense competition from Intel and new competitors designing low-cost and power-efficient chips.

Reuters reported in June that AMD was at the initial stage of reviewing whether to split itself in two or spin off a business, in a move to reverse its fortunes and take on Intel Corp.

The company said on Monday it expects revenue to have decreased about 8 percent from the first quarter, compared with its previous forecast of down 3 percent, plus or minus 3 percent.

This implies revenue of about $948 million. Analysts were expecting $999.6 million, according to Thomson Reuters I/B/E/S.

The Sunnyvale, California-based company also cut its forecast for second-quarter adjusted gross margin to about 28 percent, as weak demand from PC makers also hurt demand of its APU (accelerated processing unit) chips which combine both computing and graphic processing capability.

AMD had forecast margins of about 32 percent.

Van Hees said a weak PC market coupled with competition from Intel weighed on demand for the company’s APU chips.

AMD, which has an extensive cross-licensing agreement with Intel, has competed with the bigger chipmaker since the 1980s.

The company warned in April that it expected weak demand for personal computers to continue for some time as original equipment manufacturers focus on lean inventories.

The company said on Monday it expects gross margin to be hit by a one-time charge of about $33 million associated with a transition from 20 nanometer chip-making technology to FinFET.

AMD will report second-quarter results after market close on July 16.

The stock had fallen about 14 percent through Monday’s close since the company reported results in April.

Reporting By Lehar Maan in Bengaluru; Editing by Don Sebastian

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