AMD Issues Second Warning

Is a rare second warning by AMD that sales will fall short of projections an indication that computer makers are also struggling?

PC chip maker Advanced Micro Devices issued a rare second warning that its sales will fall short of projections, indicating that computer makers are likely also struggling to find buyers for new personal computers.

In a brief statement issued at 10:30 p.m. PDT from its Sunnyvale, Calif., headquarters, the chip maker said its expects sales of about $600 million for the second quarter, well below the $620 million to $700 million it revised down to in a warning June 18.

AMDs latest estimates are about $240 million less than Wall Street market analysts were expecting in early June, according to consensus estimates compiled by Thomson Financial/First Call.

AMD offered no further details on its lowered outlook, noting only that it will fully report its quarterly earnings on July 17.

In lowering its outlook last month, company officials blamed a failure of the expected pickup in back-to-school sales to materialize and continued weakness in overall PC sales worldwide.

"The desktop market has been relatively poor for a while, and that has probably worsened; in particular the consumer desktop segment has been very, very poor as of late," Rob Herb, AMDs chief sales and marketing officer, said in a conference call with market analysts June 18. "Mobile was a real bright spot for us, particularly through the first quarter. But the most recent sales numbers … seemed to have dropped off pretty significantly."

In the past year, AMD has struggled to compete with rival Intel Corp. at the high-end of the PC market, where the giant chip maker is able to offer processors rated at higher speeds than AMD.

In addition, slumping sales have led Intel to price its PC processors lower to fuel sales, which spurred AMD to follow suit in order to protect market share. But the price cuts significantly cut into AMDs profit margins, which were already slimmer than Intels.

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