Feeling The PC Pressure: AMD Slashes Revenue Estimates

Reeling from weaker-than-expected consumer PC demand, Advanced Micro Devices on Monday slashed its revenue outlook for the second quarter ended June 27.

The Sunnyvale, Calif.-based company, which sells desktop processors with combined AMD Radeon graphics and multicore CPU technology on A-series accelerated processing units, now expects its second quarter revenue to decline sequentially by 8 percent, compared with its previously estimated 3 percent decline.

AMD shares dipped 12 percent, to $2.18, according to The Wall Street Journal, after the revenue outlook revision.

[Related: System Builders: AMD Split-Up Reports Don't Add Up]

"The best thing AMD can do is expand their opportunities," said Jim McGregor, founder and principal analyst at research firm Tirias Research, about the company's potential. "Companies like AMD and Intel need to focus on graphics, gaming, storage, memory, not just the CPUs. PCs present a viable market, but the PC market has also matured."

The company has been struggling to keep up in an increasingly competitive chip space as more emphasis is placed on mobile devices.

PC sales continue to be an issue in 2015 for hardware vendors, as market research firm IDC in May forecast a 6.2 percent decline in the global PC market in 2015.

This decline is due in part to a lag in the market after the Windows XP end-of-support boost ended last year, as well as a reduction in inventory on the supply side as the market awaits the arrival of the Windows 10 upgrade July 29.

AMD is not the only chip company to feel the impacts of the dwindling PC market. In March, Intel -- which utilizes the same x86 design as AMD on its chips to power personal computers -- slashed its revenue outlook for the first quarter of 2015, citing weak SMB demand for its business and desktop PCs.

Kent Tibbils, vice president of marketing at ASI Corp., a Fremont, Calif.-based system builder, said that as vendors like Intel and AMD continue to struggle, system builders need to align themselves with niche opportunities in the PC market.

"I think certain parts of the market are slow and aren't doing well, but there are niches that are doing very well," said Tibbils. "Anything in the server space is a good business opportunity, and the small form factor business is doing very well. There are pockets of successful markets, and the trick is aligning yourself in verticals."

AMD also revealed Monday that a new update with its 20-nm product plans would impact its revenue outlook, stating that it has moved several of its chips originally slated to use TSMC's 20-nm fabrication process to a "leading-edge FinFET node."

According to AMD, this technology node transition adds up to a $33 million one-time charge that will impact the company's GAAP gross margin.

AMD will report its second quarter earnings July 16 after the market closes.

PUBLISHED JULY 6, 2015