AMD Cuts Q4 Processor Sales Outlook

Advanced Micro Devices is cutting its fourth-quarter sales outlook, citing a lack of demand for the company's microprocessors and other products both in the Unites States and overseas.

AMD, the world's second largest producer of x86 processors for desktops, notebooks and servers, issued the warning about its fourth-quarter revenue outlook Dec. 4. In a statement, the chip company said its fourth-quarter revenue will be about 25 percent less than the $1.59 billion in revenue AMD posted in the third quarter.

The financial crisis on Wall Street and the anticipation of less consumer spending this holiday season mean that there has been less demand for AMD's processors, graphics technology and other products. "The decrease [in revenue] is due to weaker-than-expected demand across all geographies and businesses, particularly in the consumer market," AMD said in its statement.

In November, Intel issued its own warning about the fourth quarter. With reduced demand for PCs and other hardware, Intel is now expecting fourth-quarter revenue of $9 billion, "plus or minus $300 million," rather than the previous expectations of $10.1 billion to $10.9 billion.

There has been little good news for the IT sector this week. Gartner and IDC each released reports the week of Dec. 1 that showed sales and shipments of servers had slowed in the United States and across the globe. On Dec. 3, IDC issued a report predicting that PC vendors would ship far fewer desktops and notebooks in 2009 than in 2008 and that revenue from PC sales would fall.

While both Intel and AMD are affected by overall PC sales, AMD relies more on sales of consumer desktops and notebooks as well as sales of PCs to small and midsize businesses. That seems to be one reason why AMD referred to consumer sales in its statement.

John Spooner, an analyst with Technology Business Research, said he believes that AMD and Intel are both reacting to the overall economy and both companies are trying to adjust their chip inventories to better match the reduced demand for PCs and servers.

"I think that what they appear to be doing is drawing down current inventories of processors and delaying orders as much as possible," Spooner wrote in an e-mail. "This is having an accordion affect on AMD and Intel, which is causing their sales to fall below expectations in [the fourth quarter of 2008]. It's also going to lead to higher levels of inventories. At some point, though, the PC makers will have to order more chips. Right now, the question is when."

AMD is expected to release its full fourth-quarter numbers Jan. 22, 2009. In the third quarter, AMD reported a loss of $67 million, or 11 cents per diluted share. AMD also cut another 500 positions to better control costs.