Microprocessor Makers AMD and Intel Revenues Continue to Fall

By Jessica Davis  |  Print this article Print

Microprocessor maker AMD reported lower than expected revenues and earnings, a week after rival Intel delivered similarly disappointing performance. The decline was blamed on PC makers looking to burn through inventory as end-demand deteriorates.

Chipmaker Advanced Micro Devices (NYSE: AMD) reported lower than expected revenues and earnings this week, following a similar performance reported by larger rival Intel (NASDAQ: INTC) last week.

AMD CEO Dirk Meyer told analysts that much of the decline could be attributed to computer makers looking to reduce their microprocessor inventories in anticipation of lower demand.

AMD's Q4 revenue fell to $1.16 billion from the $1.74 billion in the same period a year ago. AMD reported a Q4 loss of $1.53 billion or $2.34 per share compared to a loss of $1.77 billion or $3.06 per share in the same quarter a year ago. Excluding special items, the loss would have been $418 million.

In a report issued following AMD's analyst call, FBR Research writes: "AMD's operational and financial execution continue to be poor, in our view, with the firm burning a significant $245 million of cash and writing off a whopping $227 million of inventory in 4Q."

Last week Intel reported Q4 revenue of $8.2 billion, down 23 percent from the same period a year ago, and net income of $234 million down 90 percent from the same period a year ago. Earnings per share of 4 cents marked a decline of 89 percent from the same period a year ago.

A slackening off of microprocessor sales can lag a slackening off of PC sales as PC makers react to a drop in demand by reducing their inventories of microprocessors on hand, waiting for that inventory to turn before ordering more. That can deal double the blow to microprocessor makers.  In an interview with Channel Insider this week about Avnet's own earnings, Avnet COO Rick Hamada noted that Technology Solutions sales at Avnet started to dip in the second calendar quarter of 2008, but the Electronics Marketing business stayed steady until Q4 when it experienced a dramatic drop.

FBR Research also attributs Intel's falling numbers to "further end-demand deterioration and inventory impacts, as OEM and distributor customers lower component and finished good inventories."

On PC demand the analyst firm says: "Our most recent PC channel checks from January 13 showed Q4 PC builds fell 13 percent sequentially, while Q1 PC builds were set to fall 27 percent sequentially."

Separately, Intel announced that Chairman Craig Barrett plans to retire in May.

Jessica Davis covers the channel for eWeek and Channel Insider. Her technology journalism career began well before anyone heard of the World Wide Web and has included stints at Infoworld, Electronic News/EDN, and the Philadelphia Business Journal. Her work has also appeared on CNN and Forbes.com. She has covered hardware, software and networking, as well as the business side of technology. She has won several journalism awards, including a national ASBPE award for best staff-written column, and was named Marketing Computers hardest working tech journalist on their inaugural list of top tech journalists. Jessica can be reached at jessica.davis@ziffdavisenterprise.com

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