AMD battered with huge share declines

Bloomberg

Advanced Micro Devices Inc ad-ded its name to a growing list of semiconductor companies that were battered with huge share declines after reporting disappointing results and forecasts. The stock slumped 20 percent.
AMD’s results came on a day when investors were already pressing the sell button on a sector that many now fear is signaling a wider technology industry downturn. The Philadelphia Stock Exchange Semiconductor Index dropped 6.6 percent after Texas Instruments Inc., which has the largest number of customers and the broadest product range in the chip industry, warned that demand is slowing across many of its markets.
Before the results, AMD had put together eight quarters of double-digit percentage sales growth as it rebounded from the lowest ebb in its almost 50-year history. Company management pinned its shortfall on the graphics-chip unit and said the business will rebound this quarter. The executives maintained AMD is making good on its promised gains against larger rival Intel Corp.
The biggest reason for the company’s fall was the unrealistic expectations that made it an outperformer on the S&P 500 Index this year, according to Ruben Roy, an analyst at MKM Partners. While bullish analysts focussed on signs of progress in the company’s microprocessors and manufacturing problems at Intel, AMD’s other units — graphics and custom chips for game consoles — have began to struggle, he said.
“There was a lot of hope built into that share price,” Roy said. “They’re doing OK with execution in computing, but there are other parts of the business.” The stock had more than doubled this year, before falling in regular trading as part of the broader market rout. It dropped 25 percent after the earnings were released, wiping out more than a fifth of AMD’s market value.
Fourth-quarter revenue will be about $1.45 billion, plus or minus $50 million, the Santa Clara, California-based company said in a statement. That compares with analysts’ average estimate of $1.6 billion, according to data compiled by Bloomberg.
Third-quarter net income was $102 million, or 9 cents a share, compared with $61 million, or 6 cents a share, a year earlier. Analysts had forecast profit of $106 million. Revenue rose 4.4 percent to $1.65 billion, compared with analysts’ average projection of $1.7 billion.
AMD is the second-largest maker of graphics processors used as add-in cards in gaming personal computers, a market led by Nvidia Corp. The company also is trying to make a comeback in server processors against Intel, which has about 99 percent of the market.