AMD lowers quarterly forecast, but execs predict better days ahead

Advanced Micro Devices' revenue was down 28 percent in 2015

Posted February 24th, 2016

Story highlights
  • AMD forecast revenue will be down 14 percent in the first quarter
  • Profitability will return to AMD in 2016, CEO predicts

Advanced Micro Devices didn’t have a great 2015, with revenue down 28 percent, and forecasts released Tuesday indicate the current quarter will bring more revenue declines.

The chipmaker forecast that its revenue would be down 14 percent in the first quarter of this year compared to the same quarter last year, which is below what analysts were expecting, sending the company’s stock down more than 6 percent in after-hours trading. AMD chief financial officer Devinder Kumar faulted weak game console sales and economic problems in China for the lower forecast.

The company also released its fourth-quarter financial results on Tuesday, reporting revenue of almost $958 million, slightly better than Wall Street forecasts but still a 23 percent decline from the $1.24 billion it reported the same period last year.

There was a glimmer of hope for AMD investors: CEO Lisa Su said in a conference call with analysts that she expected to return the company to “profitability” in the second half of 2016, and that she expects year-over-year revenue growth.

AMD reported losses of $102 million in its fourth quarter, or 13 cents a share. This same quarter last year the company reported a loss of $364 million, or 47 cents a share.

When excluding the impact of certain expenses, AMD reported a loss of $79 million, or 10 cents per share, for the quarter, which was in line with analysts’ projections.

Tuesday’s earnings report capped a difficult year for AMD. The company has struggled amid weak PC sales and market domination by larger rivals Intel and Nvidia Corp.

“Their road ahead is pretty grim,” said Endpoint Technologies Associates analyst Roger Kay. He noted that there will be new products coming out in 2016, but said he isn’t convinced any single product will change AMD’s fortunes.

In October the company announced it would cut 500 jobs, or 5 percent of its global workforce, in order to lower costs. This is on top of 700 job cuts announced in October 2014 as part of a previous belt-tightening restructure of its workforce.

And that same month AMD announced that it was selling an 85 percent stake in its Asian manufacturing operations as part of a joint venture with Nantong Fujitsu Microelectronics, which is based in China.

AMD makes computer and graphics processors that are used in personal computers and other devices, such as servers and game consoles. The company’s formal headquarters are in Sunnyvale, Calif., but Austin is where most of its senior executives live and much of its engineering is done. The company is one of the world’s largest chipmakers and has about 1,600 employees in Central Texas.

The company is hoping to turn things around with a new design called “Zen” for an advanced processor core that can be used with AMD chips but won’t be available until at least 2016. Zen can be used in chips that are used in desktop computers, notebooks and tablets.

“The company is riding on Zen,” said analyst Patrick Moorhead with Austin-based Moor Insights and Strategy. He said that given Intel’s dominance, it made sense to focus on Zen as a potential turnaround product.