AMD Blames Weak PC Demand for Gloomier Than Expected Q2 Pre-Report

Struggling AMD (AMD) said that revenue for Q2 2015 ended June 27 will be lower than previous guidance, declining 8 percent from the prior quarter instead of the 3 percent dip the chip maker expected.

AMD blamed weaker than anticipated consumer demand for PCs that affected its OEM processor sales. AMD said it anticipates that Q2 channel sales and its efforts to reduce channel inventory will meet its forecast. AMD is slated to report results for the quarter on July 16.

The company’s projected 8 percent sequential slide indicates sales will come in for the period at about $947 million, well below analysts’ forecast of $999.5 million, slipping its quarterly revenue below the $1 billion mark for the first time in some 10 years.

AMD said that its non-GAAP gross margin for the quarter, initially projected at 32 percent, will be thinner at 28 percent. It blamed the narrower gross margin on a higher mix of Enterprise, Embedded and Semi-Custom segment sales and lower than anticipated Computing and Graphics processor sales owing to sluggish demand from OEMs.

The chip maker said it will close the quarter with some $830 million in cash as expected.

Word of AMD’s poor-than-forecast Q2 results hammered its stock to its lowest levels since November, 2012, closing on Thursday, July 9 at $1.98 a share. The stock has plummeted 26 percent this year.

Last month, word surfaced that AMD’s top brass, including chief executive Lisa Su, were considering proposals to break-up or spin off its graphics and licensing business from its server unit selling high-powered chips for data center deployments.

AMD is said to have contracted with a consulting firm to help the vendor assess its options, including ways in which it could break up the company or spin off a segment into a separate operation. However, a substantial stumbling block to any version of splitting the company will be preserving cross-licensing agreements such as the deal AMD currently holds with Intel (INTC).

While AMD has yet to decide on a future path, Su is said to be determined not only to arrest the chip maker’s losses but also to position the company on a more competitive plane with Intel. AMD reportedly bandied about but rejected the split idea in earlier sit-downs but Su is said to have revived the option.

AMD subsequently issued a statement denying the reports.

In mid April, AMD delivered Q1 2015 results under forecast with revenue falling 26 percent from the same time last year to $1.03 billion along with a net loss of $180 million, or $0.23 a share. On a sequential basis, AMD pared its losses from Q4 2014 when it recorded a net loss of $364 million, or $0.47 a share.