AMD preannounces lower revenue due to poor demand for its APUs

Fewer customers than expected have bought AMD's chips that combine a CPU and a graphics chip, forcing AMD to rely on sales of lower-margin products to survive.

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AMD warned Monday that its second-quarter revenues would fall by 8%, due to a lower demand for PCs than it had previously expected.

AMD said previously that revenue could fall by as much as 3%. AMD specifically blamed weaker-than-expected demand for its APUs, which combine a CPU and a graphics chip and make up its A-series product line. The company had already slashed A-series APU prices in late 2014 to help move product. In the second quarter, AMD said, it expects channel sales and channel inventory reduction efforts to be in line with the company’s plans.

AMD said gross profit margins (non-GAAP) are expected to be down as well, to 28%, versus the 32% the company originally expected. Because demand for its APUs is down, the company said, it will have to rely more on sales of lower-margin embedded and semi-custom chips. AMD also said it would take a charge of $33 million as it transitions its manufacturing from 20-nm to a FinFET process.

The second quarter can be one of the lower points for chip makers, a lull before PC makers begin to buy chips for back-to-school PCs due to ship later in the year. AMD, however, has had to face both a lack of overall demand for PCs and its unique troubles in keeping up with Intel.

AMD will announce second-quarter earnings on July 16, a day after rival Intel announces its earnings. Intel said last quarter that it expects second-quarter revenue to be $13.2 billion, plus or minus $500 million, or about 3 percent higher than the first quarter. 

Why this matters: AMD’s recent graphics products have been well regarded, and initiatives like its Quantum PC have set the company apart. AMD has also targeted the low end of Intel’s CPU lineup while it more fully bakes next-gen cores like the Zen. Newly minted CEO Lisa Su has her work cut out for her to get AMD back on track until those chips hit the market.

This story, "AMD preannounces lower revenue due to poor demand for its APUs" was originally published by PCWorld.

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