Processor Maker AMD to Follow Intel on the Road to Recovery?

By Jessica Davis  |  Print this article Print

Processor maker AMD will announce its Q2 earnings this week, and at least one analyst firm believes AMD will follow Intel's lead with improving financial results that could indicate the battered chip maker could be on the road to recovery. Analysts' supply chain checks show that shipments have increased and that PC builds both for laptops and desktop motherboards are on the upswing.

When processor maker Intel (NASDAQ:INTC) announced its earnings recently, the chip giant did better than expected, giving hope to some that the recession’s disastrous effect on technology sales may be slackening. And now an analyst firm says that prognosis may get some further support from Intel rival Advanced Micro Devices’ (NYSE: AMD) earnings, which will be released on July 21.

FBR Research reports that its checks into AMD’s supply chain and PC builds have revealed the company’s fortunes may be changing. The firm’s checks with the top laptop ODMs and the top desktop motherboard makers show that PC builds for AMD grew by 7 percent sequentially for Q2, with Q3 PC builds expected to grow by another 13 percent sequentially.

"We do think the company will report strong Q2 results and Q3 guidance on Tuesday after the market close," the firm says in a brief report. "Our new distributor checks suggest Asian distributors had a stronger-than-expected June quarter and are more positive about Q3 shipment prospects. In addition, recent checks for AMD and the PC supply chain have strengthened."

The firm says that demand in Asia remains robust and global PC shipments are rebounding.

More specifically, FBR Research says that recent checks with Asian chip distributors suggest that Q2 sell-through shipments grew 20 percent sequentially. That’s better than the firm’s checks from the past three consecutive months, FBR Research says. The firm adds that its Asian distributor contacts now expect Q3 chip sell-through shipments to grow 5 percent to10 percent quarter over quarter.

Further, FBR Research says that AMD’s recent production start checks have gotten better, increasing by 78 percent quarter over quarter, compared with last month’s 63 percent. Q3 production is now expected to grow 1 percent sequentially.

"We forecast AMD will generate about $160 million of free cash flow in the second half of fiscal 2010, a dramatic improvement from the significant losses we expected three and six months ago," the firm says in a brief research note. "Although Taiwan Semiconductor's inability to produce 40 nanometer chips at adequate yields has all but eliminated AMD's time-to-market advantage over NVIDIA, we nevertheless think AMD could have a stronger second half of 2009 than investors expect."

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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