Advanced Micro Devices Inc posted its sixth consecutive quarterly net loss on Thursday as the chip maker continued to lose market share to far larger rival Intel Corp. But AMD shares ticked higher in extended trading as the company said it expects second-quarter revenue to decrease in line with seasonal trends, reassuring investors who had feared a steeper decline.
"The stock is up due to a bit of relief that things weren't worse," said CRT Capital Group analyst Ashok Kumar. AMD Chief Executive Hector Ruiz said on a conference call that while there no details to announce immediately, they would be coming in the next three months, or by the end of the year.
"We believe will also have an opportunity to further restructure the company for increased focus and added flexibility, which places us in a better position to deliver sustainable, profitable growth," Ruiz said, noting that he hopes to "communicate details in the near future."
AMD, based in Sunnyvale, California, said its first-quarter net loss narrowed to $358 million, or 59 cents a share, from $611.0 million, or $1.11 a share, a year ago. Revenue advanced 22 percent to $1.51 billion from $1.23 billion.
AMD's adjusted loss per share was 51 cents, compared with analysts' average expectation of a loss of 47 cents, according to Reuters Estimates. Revenue was pegged at $1.50 billion by Wall Street, after a warning from the company last week.
The poor results came even as Intel and other high-tech companies like International Business Machines Corp have so far posted generally positive earnings. AMD remains a generation behind Intel in its chipmaking technology, but if AMD can ramp up production of its Barcelona server chips their competitive price could help the company regain market share. But Intel's own next-generation chip, code-named Nehalem looms.
"They have no place to hide right now," Kumar said. "Desktops PCs are being commoditized, in notebooks the mix is shifting to the lower end, and the only respite is in servers and they don't have a competitive product there right now."
Gross margin in the first quarter was 42 percent, down from 44 percent in the fourth quarter, but up from 28 percent in the year-ago period. "On the positive side, If AMD is successful in ramping Barcelona, they can stem further market share loss to Intel," Kumar said. "But again, they only have a 6- to 9-month window, then Intel ramps Nehalem and the pressure is on again."
AMD had said on April 7 that it would cut 10 percent of its work force, or about 1,680 jobs, and gave a first-quarter revenue estimate below expectations, sending its shares down as much as 5 percent that day.
The company said on Thursday that there may be more restructuring in store as it aims to reduce costs so that it can turn a profit on just $1.5 billion in revenue. But AMD said it probably won't be entirely there by the fourth quarter. "I was encouraged by the comments about aggressive restructuring," said American Technology Research analyst Doug Freedman of comments made on the Thursday conference call.
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