AMD: Third quarter unravels amid weak demand, excess inventory

Summary:AMD is hobbled amid weak demand and excess inventory. Company plans a $100 million writedown of excess product.

AMD cut its revenue outlook for the third quarter for the second time amid "weaker than expected demand across all product lines caused by the challenging macroeconomic environment."

The news wasn't totally unexpected as some analysts already doubted AMD's forecast. AMD cut its third quarter outlook when it reported its second quarter results. Intel already warned the third quarter was rough. 

Specifically, AMD now expects third quarter revenue to fall 10 percent from the second quarter. AMD had projected revenue to be down 1 percent or so in its last warning.

The reason behind AMD's fall is obvious--- PC sales have been clocked ahead of the Windows 8 upgrade cycle. Meanwhile, Intel is also struggling, but has a better product cadence and balance sheet.

AMD said that its third quarter gross margin will be about 31 percent, well below the 44 percent projected in the last warning. Why? AMD is saddled with excess inventory. The chipmaker said that it will take an inventory write-down of about $100 million due to "lower anticipated future demand for certain products."

The company added that it suffered from lower than expected average selling prices and weak utilization rates in its manufacturing efforts.

AMD said Sept. 18 that CFO Thomas Seifert would be leaving the company. Shares of AMD fell below the $3 mark in afterhours trading. 

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More on AMD's rough quarter:

 

Topics: Hardware, PCs, Processors, Servers

About

Larry Dignan is Editor in Chief of ZDNet and SmartPlanet as well as Editorial Director of ZDNet's sister site TechRepublic. He was most recently Executive Editor of News and Blogs at ZDNet. Prior to that he was executive news editor at eWeek and news editor at Baseline. He also served as the East Coast news editor and finance editor at CN... Full Bio

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