Advanced Micro Devices chief executive Lisa Su said today that the PC market remains unpredictable and will continue to be so at least through the first half of 2015. But she, and chief competitor Intel, hopes the launch of Windows 10 will brighten things up.
Earlier today, AMD reported that it missed Wall Street’s expectations for the first quarter by a considerable 4 cents a share. It reported a loss of 9 cents per share on revenues of $1.03 billion. Analysts had expected a loss of 5 cents per share on revenues of $1.05 billion.
In after-hours trading, AMD’s stock is trading down 9 percent at $2.61 a share.
Orders from PC manufacturers during the quarter were apparently soft. “We saw poor results in the quarter as our customers managed inventory levels amid uncertain consumer demand,” Su said during the question and answer session with analysts. “Given some of the uncertainties in the market we are being conservative on the second quarter.”
AMD said it expects lackluster results to continue into the next quarter, with an estimated three percent contraction in revenues. However, AMD says the margin of error for the coming quarter’s projected contraction is plus or minus 3 percent, so the statement has limited meaning.
“It’s hard to predict when the overall PC market will normalize,” Su said, “but we are preparing for a better second half of the year as Windows 10 computers make their way into the market.”
“We are all hopeful that the Windows 10 launch will be a strong catalyst for the market,” she said.
AMD’s earnings are closely watched as a bellwether for low-cost computers. The company is the No. 2 maker of PC microprocessors, and it is also one of the “big two” graphics chip makers for PCs. The company has been trying to adapt to the shift toward mobile by creating alternative chips in custom markets where Intel, its giant rival, doesn’t play.
However, Su said in an interview with VentureBeat that her company won’t walk in Intel’s shadow.
AMD’s computing and graphics business continued to decline during the first quarter, raising concern with some analysts. Su pointed out that the product is fine — it’s just the demand is soft. “We have significant technology and IP to serve this market very well,” she said.
Besides PC processors, AMD makes graphics chips, embedded processors, enterprise chips, and semi-custom chips such as game console processors for the PlayStation 4 and Xbox One.
Su said that her company’s business in making chips for embedded devices might produce the sales needed to help improve future results.
It’s clear that since the arrival of Su in the CEO chair last fall, AMD is been trying to narrow its focus. “I’ve been on the job for about six months, and I’ve been spending a lot of time thinking about where we think we can make the greatest gains that are most sustainable for the business going forward,” Su said.
Case in point is the announcement today that AMD will immediately exit its dense server systems business, formerly SeaMicro, as part of the strategy to “simplify and sharpen the company’s investment focus.”
“Microservers have not developed at the pace we thought,” Su said. “Our core competency is really in processors.”
Analysts are generally positive on AMD’s decision to jettison SeaMicro. “The market shifted a lot since AMD bought SeaMicro and most OEMs have a density play today and the market has really migrated away from smaller cores to larger cores,” explains Moor Insights and Strategy analyst Patrick Moorhead in a note to VentureBeat.