AMD Reduces Q2 Forecast as Global Sales Slow

AMD officials say continued weak demand for consumer PCs worldwide will drive second-quarter revenue down by 8 percent from the first quarter.

AMD chip

Advanced Micro Devices officials are dropping the chip maker's second-quarter revenue projections due to slowing demand for consumer PCs.

The company announced July 6 that revenue for the three-month period will decline about 8 percent from the first quarter, when AMD reported $1.03 billion in revenue. At the time, company executives said they expected revenue to decline 3 percent.

The downgraded forecast highlights the continuing troubles in the worldwide PC market, which has seen shipments decline since 2011 as consumers and business users spent more of their dollars on such devices as tablets and smartphones. The decline slowed last year, due in large part to Microsoft's ending support for the aged Windows XP operating system, a trend that helped component makers and OEMs alike.

Now, even as tablet sales slow, the declining demand for PCs continues, particularly in the consumer space. And despite the best efforts of executives, AMD is still heavily reliant on the PC space for the majority of its revenue.

Rival Intel in the first quarter was caught by the slowing PC market, slashing its projections for the quarter by $900 million.

Along with AMD's revenue, its gross margins for the quarter also will be lower than expected, hurt not only by the slowing PC demand but also a larger percentage of sales in the Enterprise, Embedded and Semi-Custom segment and an expected $33 million charge tied to the transition from a 20-nanometer manufacturing process to a FinFET process.

The company is scheduled to announce second-quarter financial numbers July 16.

AMD officials for several years have been trying to reduce its exposure to the PC market. Last year, about 60 percent of the company's revenue came from its Computing and Graphics accelerated processing unit (APU) business, while about 40 percent came from such areas as semi-custom, embedded and data center chips. The semi-custom segment has helped AMD over the past several quarters after Sony and Microsoft decided to use AMD chips in their latest game consoles.

During a meeting with financial analysts in May, President and CEO Lisa Su and other executives outlined their plan to make AMD consistently profitable again. The strategy included focusing on the high-end PC market as well as immersive computing, gaming and cloud and data center infrastructure. Su during the meeting noted that AMD officials, understanding the company's financial decision and the changing markets, where to focus their efforts. Systems like commodity PCs and Internet of things (IoT) devices didn't make sense for the company, she said.

"We don't need to do everything," Su said. "We need to pick the things we can do very well."

She and other executives talked about upcoming products that they expect will help drive the company to sustained profitability in the second half of the year and beyond, including the upcoming Zen CPU, a core design more than two years in the making that will use simultaneous multi-threading (SMT), support DDR4 memory and feature a FinFET transistor design for 14nm and 16nm chips. The Zen architecture will find its way into chips for both PCs and servers. AMD also has started unveiling Radeon GPUs featuring high-bandwidth memory (HBM), a technology that officials said offers three times the performance-per-watt of the current GDDR5 and a 50 percent increase in energy efficiency.