SUNNYVALE (dpa-AFX) - Advanced Micro Devices Inc. (AMD) Thursday posted a third-quarter loss, from a profit last year, as revenues and margins dropped sharply reflecting weak demand for PCs and notebooks with consumers preference turning to tablets and smartphones amidst a weak global economy.
The Sunnyvale, California-based company also announced plans to lay off 15 percent of its global workforce, in an effort to curb its operating expenses. This is the second job cut under Chief Executive Rory Read, who took over the reins of the company last year August.
AMD's revenues for the quarter plunged 25 percent, struggling as it has been for the past few quarters. The chip maker's top line is heavily dependent on sales of PCs and notebooks, however soft market conditions coupled with consumers now preferring tablets and smartphones --which uses chips made by other manufacturers-- have impacted AMD very much. Worsening global economic conditions, especially in Europe and China have also put pressure on the company's bottom line.
According to research firm Gartner Inc. (IT), worldwide PC shipments in the third quarter fell 8.3 percent to 87.5 million units.
'The PC industry is going through a period of very significant change that is impacting both the ecosystem and AMD. It is clear that the trends we knew would re-shape the industry are happening at a much faster pace than we anticipated. As a result, we must accelerate our strategic initiatives to position AMD to take advantage of these shifts and put in place a lower cost business model,' Read observed.
The company has announced restructuring plans, which includes laying off about 15 percent of its 11,700 staff, and site consolidations. The restructuring plans, majority of which will be completed in fourth quarter, is anticipated to save about $20 million in the fourth quarter of 2012 and around $190 million in 2013. AMD will record restructuring expenses of about $80 million in fourth quarter.
'Our restructuring efforts are designed to simplify our product development cycles, reduce our breakeven point and enable us to fund differentiated product roadmaps and strategic breakaway opportunities,' Read added.
AMD's revenues for the third quarter dropped to $1.27 billion from $1.69 billion last year. Analysts estimated revenues of $1.28 billion for the quarter.
At computing solutions division, which includes microprocessors, sales decreased 28 percent, while revenues from graphics segment that includes video and multimedia products for desktops and notebooks, dropped 15 percent.
Gross margin for the three-month period dropped sharply to 31 percent from 45 percent last year.
AMD's loss for the third quarter was $157 million or $0.21 per share, compared to net income of $97 million or $0.13 per share last year. Adjusted loss was $0.20 per share, compared to earnings of $0.15 per share a year ago. On average, 28 analysts polled by Thomson Reuters expected loss of $0.15 per share for the quarter. Analysts' estimates typically exclude special items.
Looking forward to the fourth quarter, AMD expects revenue to decrease 9 percent, plus or minus 4 percent, sequentially.
AMD closed Thursday's trading at $2.62, down $0.15 or 5.42%, on a volume of 34.5 million shares.
Copyright RTT News/dpa-AFX
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