AMD: Computer Sales Slump Not Over

Computer hardware resellers looking for chipmakers to signal an end to their slumping sales will have to just keep looking.

Advanced Micro Devices (NYSE:AMD) CEO Dirk Meyer dashed the hopes that Intel had raised last week saying that there’s no way that the computer hardware business had hit bottom yet. AMD, like its larger rival Intel, makes the processors that are the brains in PCs, laptops, notebooks, desktops and servers.

Meyer made the comments during a conference call with Wall Street analysts following AMD’s release of its Q1 earnings.

"I don’t see how anybody can say that we’ve hit the bottom," Meyer said, responding to a question during the conference call.

Just last week Intel’s CEO Paul Otellini told analysts in Intel’s earnings conference call that Intel believed the industry had hit bottom.

IBM’s earnings, announced earlier this week seemed to favor the AMD perspective. Hardware sales declined 23 percent while software and services experienced less sharp declines.

AMD reported Q1 revenue of $1.18 billion, sequentially flat and a decrease of 21 percent compared to Q1 2008. AMD’s net loss came in at $416 million or 66 cents per share compared to Q4 2008’s net loss of $1.44 billion and a Q1 2008’s net loss of $351. AMD completed its spin off of its chip manufacturing foundry business GlobalFoundries in Q1, removing what had been a big contributor to the company’s continuing losses.

Looking ahead AMD says it expects its product revenue to be down for Q2 2009, but provided no further details, and calling the visibility "murky."

Analysts said AMD’s model remained in transition as the company completed its spin out of GlobalFoundries.

"AMD reported 1Q revenues that were better than expected as customers replenished some inventory late in 1Q," said analyst firm FBR Research in a brief report that followed the earnings announcement. "However, pro forma earnings per share was worse than the consensus estimate due to low gross margins…Clearly, the AMD financial model is in transition as the firm spins out its manufacturing assets into GlobalFoundries, the Abu Dabi financed AMD foundry."