AMD's second quarter margins squeezed

Chipmaker reports second quarter earnings that falls short of Wall Street targets.
Written by Larry Dignan, Contributor

AMD continues to get squeezed by Intel. The company delivered second quarter earnings and a third quarter outlook that fell short of Wall Street targets.

The chipmaker, which had a tough Intel earnings act to follow, delivered a net loss of US$330 million, or 49 cents a share, on revenue of US$1.18 billion, down 13 percent from a year ago, and flat from the first quarter. The rub: AMD's net loss includes a 13 cents a share gain from the sale of inventory written down in the fourth quarter.

In a statement, AMD said that its second quarter gross margins were 37 percent including an 8 point gain from the inventory writedown. Wall Street was expecting gross margins of 38.24 percent.

Given that AMD's margins are shrinking and Intel's are expanding you can only conclude that there’s one vicious squeeze going on. As for the outlook AMD said:

Considering current macroeconomic conditions, limited visibility and historical seasonal patterns, AMD expects its Product Company revenue to be up slightly for the third quarter of 2009.

That outlook may be shy of the US$1.21 billion expected by Wall Street.

AMD CEO Dirk Meyer said that the margin performance was disappointing, but "new platform, microprocessor and graphics introductions planned for the second half of 2009 position us well" for improvement.

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