AMD May Follow Intel's Lead in Lowering Forecasts: Analysts
Intel's announcement that it is reducing its fourth-quarter revenue forecast due to hard disk drive shortages caused by the flooding in Thailand could have a ripple effect on other tech companies, in particular smaller rival Advanced Micro Devices.
Analysts are expecting AMD to make a similar announcement within the next week or two, as more reports about HDD shortages and the impact they will have on PC supplies emerge. Most recently, analysts at IHS iSuppli reduced their first-quarter global PC forecast, calling for 3.8 million fewer units shipped than had been expected before the flooding in Thailand.
Some analysts aren't waiting for AMD to make any announcement. In a note Dec. 13, Sterne Agee analyst Vijay Rakesh lowered his fourth quarter 2011 and first quarter 2012 estimates for AMD based in large part on Intel's announcement, as well as comments from such OEMs as Apple, Dell and Hewlett-Packard on the possible impacts of the HDD shortages.
"HDD shortages as a result of the Thai floods have caused OEMs to align chip orders with component shipments in the near term," Rakesh wrote in his note. "HDD shortages are expected to peak in January, with supply chain recovering into March."
The analyst pointed out that, like Intel, AMD was forecasting a similar fourth-quarter revenue jump of about 3 percent. "We are therefore moderating our C4Q11 AMD estimates down," Rakesh said.
PC inventories are about 10 to 15 percent below normal, he said, though adding that there could be a "significant" rebound in the second quarter if the HDD supply issues are resolved by then.
AMD executives have not given any official guidance regarding whether the Thailand floods and HDD shortages will have much impact on their business, and a spokesman declined comment when contacted by eWEEK. However, in a Dec. 13 report, Raymond James analysts Hans Mosesmann and Brian Peterson said that in a discussion with AMD CEO Rory Read, AMD may be in a better position than Intel.
AMD officials in September lowered the company's third-quarter financial forecasts due to issues with manufacturing partner Globalfoundries, which limited the number of 32-nanometer "Llano" processors. Those problems gave AMD "a lower preflood base in 3Q11. 1H12 will be tough in terms of hard disk drive (HDD) supply, but Mr. Read indicated that the supply chain is quite a bit more resilient than the Street may think," the Raymond James analysts wrote.
A harsher-than-normal monsoon season led to widespread flooding throughout Thailand starting in October, which in turn hampered the worldwide HDD market. Thailand reportedly puts together as much as 70 percent of the world's hard disk drives.
Analysts expect that the HDD market will rebound in the second half of the year-companies already have started to move the work out of Thailand, and the facilities within the country should start going back online as the flooding cleanup continues. IHS iSuppli analysts said that could lead to a glut of HDDs in the market as the year progresses.
Until then, though, PC inventories will remain squeezed, which led several analysts to remark that Intel's announcement did not come as a surprise.
"Our view was that it was only a matter of time before" Intel officials admitted the problems caused by the floods, Jefferies and Co. analysts said in a Dec. 12 note.
Gartner, IDC and other analyst firms have forecasted slow growth in the semiconductor market for 2012, with the Thailand flooding being a contributing factor, along with lower PC demand fueled by economic uncertainty worldwide.