AMD CEO acknowledges disappointing quarter and PC market share losses

Advanced Micro Devices chief executive Rory Read said that the chip maker’s second-quarter financial results were a “disappointment” and meant that AMD did not meet the commitments that he pledged when he joined the company last August.

Read made the statements in a conference call with analysts after the company reported earnings. AMD still generated a profit of $37 million in the quarter, and its graphics chip business performed seasonally well. But revenues were down 11 percent to $1.41 billion compared with a year ago. AMD is the second largest supplier of PC microprocessors, behind Intel. In after-hours trading, AMD stock is down 3.7 percent.

Read pledged the company has not changed its priorities and would “move forward confidently” and take steps to “transform our business.”

Read said, “After a reasonable start, we saw business velocity slow in the latter part of the quarter, driving this revenue miss.”

Desktop microprocessor sales in China and Europe were particularly weak, and an overall soft PC market impacted notebook computer chip sales. AMD quickly reduced its spending in the quarter, allowing it to keep gross margins the same at 46 percent.

AMD shipped too many of its Llano chips in the channel, and the sales of those chips stalled, resulting in higher inventory in the sales channel. There were too many motherboards in the market as well due to a mismatch in what was needed in the channel. AMD will be able to control this in the future, Read said.

“I believe we lost market share in the quarter,” Read said. “I don’t think there is any doubt about that.”

He was optimistic about the future due to the upcoming arrival of the Brazos 2.0 generation of chips and the arrival of the first “ultrathin” notebooks with AMD chips in them. AMD doubled its shipment of Trinity hybrid microprocessor-graphics chips (known as accelerated processing units, or APUs) during the quarter, and it is not supply constrained on those chips. Read is also looking forward to the launch of the Windows 8 operating system in the fourth quarter; Microsoft said it will introduce the operating system on Oct. 26.

Server business increased from a year ago but was below expectations. In graphics, Read said the company recaptured the title of having the world’s fastest graphics chip during the quarter and launched a number of new graphics chips for workstations. For the full year, Read said AMD processor unit sales would grow in the low single digits.

Read said AMD would continue to focus on low-power chips, disruptive server technology such as its Sea Micro server platform, and cloud-based computing.

AMD closed the quarter with 11,737 employees, compared with 11,599 a year earlier.