Slower sales in China, Europe hit AMD in the bank

IDG News Service - Advanced Micro Devices expects its second-quarter revenue to drop by 11 percent from the first quarter due to slow sales in China and Europe, the company said Monday.

AMD had said previously that its revenue for the quarter, ended June 30, would increase by 3 percent sequentially, plus or minus 3 percent. For the first quarter, it reported revenue of US$1.59 billion and a loss of US$590 million after charges.

AMD released its new Trinity chips for PCs in the second quarter, and had expected those and other products to help expand its sales. It blamed the lower forecast on "business conditions that materialized late in the second quarter."

Along with the slowdown in China and Europe, weak consumer spending affected AMD's OEM (Original Equipment Manufacturing) business, suggesting PC makers bought fewer chips than expected.

The PC market has been growing at a slower-than-expected pace, with more interest in tablets and smartphones for computing. Analysts have predicted weak PC sales growth in the second quarter.

Macroeconomic problems in China, Europe and the U.S. may have softened AMD's business, said Dean McCarron, principal analyst at Mercury Research.

"We're dealing with a global economic problem that affected PC and microprocessor sales," McCarron said, adding that corporate and consumer purchases are also slowing in the U.S.

AMD's business is largely conducted at the consumer level, so it'll feel a larger impact than rival Intel, McCarron said. There will be some impact to Intel, but the effect will be softened by the enterprise business, which is more stable.

The numbers released Monday were preliminary. AMD is due to report its full second-quarter results on July 19.

Agam Shah covers PCs, tablets, servers, chips and semiconductors for IDG News Service. Follow Agam on Twitter at @agamsh. Agam's e-mail address is agam_shah@idg.com