AMD Quarter Beats ForecastsBy Reuters | Posted 2010-07-16 Email Print
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AMD and larger rival Intel's positive quarter results signals a resurgence of IT enterprise spending after years of tight budgets.LOS ANGELES, July 15 (Reuters) - Chipmaker Advanced Micro Devices Inc (NYSE:AMD) posted better-than-expected results and estimated revenue growth of up to 10 percent in the current quarter on stronger demand for its new notebook chip set.
The news came two days after far larger rival Intel Corp (NASDAQ:INTC) set a bright tone for semiconductor industry earnings, signaling a resurgence of information technology enterprise spending after years of straitened budgets.
AMD Chief Financial Officer Thomas Seifert said the company expects third-quarter revenue to grow 5 percent to 10 percent from the second quarter. That would translate to a range of $1.73 billion to $1.81 billion. Analysts' previous consensus forecast was $1.66 billion.
Seifert said research and development spending will hold steady between the periods, he added.
Information technology companies typically have a strong third quarter, riding the wave of back-to-school spending and retailers gearing up for the Christmas season.
AMD executives also said they will speed up the launch of their Ontario chip to the fourth quarter. The product will combine general processor execution with graphics processing under the company's Fusion initiative, which analysts see as a potential growth engine for AMD.
AMD President and CEO Dirk Meyer said the strong second-quarter earnings reflected demand for the company's combination of microprocessor and graphics chips and its recently launched Vision platform for notebooks.
AMD said on Thursday that revenue rose 40 percent to $1.65 billion in the period, beating expectations of $1.55 billion according to Thomson Reuters I/B/E/S.
It posted net income, excluding items, of $83 million, or 11 cents a share, versus a net loss of $244 million, or 37 cents a share, in the year-ago period. That surpassed expectations for 6 cents a share.
AMD joins Intel in beating Wall Street expectations for sales. Patrick Wang, analyst with Wedbush Securities, said there was a disconnect between what analysts had expected from Intel and AMD earnings and what the companies reported.
"I'm kind of curious where all these (computers) are going, maybe everybody in China has two computers now," Wang said.
"There continues to be a disconnect here in terms of overall demand shipments."
The company reported gross margins of 45 percent, which was above the 27 percent they hit in the year-ago period and the 43 percent from the first quarter. It has steadily improved its profitability since it spun off its chip manufacturing arm last year.
"If they can walk the margins up in the back half of the year, you're going to get a lot of investors that are more bullish on the name," Wang said.
The strong results for Intel and AMD came as research firms IDC and Gartner this week said global sales of personal computers spiked more than 20 percent in the second quarter on renewed demand by businesses and European consumers.
AMD had posted 12 consecutive quarters of losses until the fourth quarter of 2009.
The company has committed to using free cash flow to pare down its more than $2 billion in long-term debt.
"So far we're living up to that guidance and this is what we're going to continue to do moving forward," Seifert said.
Shares of Sunnyvale, California-based AMD rose 2.3 percent to $7.58 in after-hours trading, after closing nearly flat at $7.41 on the New York Stock Exchange. (Reporting by Alex Dobuzinskis: Editing by Richard Chang)
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