.....For starters, there’s a good reason why AMD isn’t lowering its sales guidance quite yet. Chief Financial Officer Bob Rivet told financial analysts Thursday that rather than echo Intel’s warning, he will give an update the week after Thanksgiving.
Why wait? Because of Black Friday, the biggest shopping day of the year. Bargain-hunting consumers are AMD’s core audience, while Intel does far better with higher-end consumers and businesses. Holiday buying will surely take a hit this year – a survey from Accenture shows that 40% of U.S. consumers plan to spend less this year than last. But if enough coupon clippers show up on Nov. 28 to buy cheap PCs, AMD could get a boost. Veteran chip analyst Nathan Brookwood of Insight 64 said the poor economy might help AMD gain share....
As AMD CFO Bob Rivet told analysts, AMD would give guidance, and here it is:
Chip maker Advanced Micro Devices Inc. warned Thursday its fourth-quarter revenue will drop about 25 percent from third-quarter levels due to weaker-than-expected demand, particularly in the consumer market.
Though analysts generally expected the cuts, some were surprised by the size of the revision. Deutsche Bank analyst Ross Seymore said the magnitude of the decline was "substantially worse" than his and other estimates.
AMD has been on a quest to return to profitability after seven consecutive quarterly losses. Earlier this year, investors cheered the move to spin off its manufacturing operations into a separate company, and its latest chip for servers, known as Shanghai, has raised confidence in AMD's prospects following problems with its earlier Barcelona chip. But as AMD management works to turn around the company, the downturn in the wider economy may make a quick return to profitability less likely.
"We estimate revenue will be substantially below AMD's breakeven goal of $ 1.5bn through all of 2009, suggesting the company may need to further reduce costs," said Seymour in a note to clients.
AMD has already been taking steps to deal with the downturn, saying last month it would cut 3% of its work force.
One ratings agency said AMD's debt rating is unlikely to be affected by the announcement.
"They have been able to absorb a fair amount of negative operating trends, so I'm leaning towards a suspicion that they will be able absorb this one," said Standard & Poor's analyst Lucy Patricola, who has a B rating on the AMD's debt. AMD's debt has been trading at distressed levels, implying bankruptcy in the next year or so, for some time. But even with Thursday's announcement, "it's very hard to see where there would be a bankruptcy," Patricola said.
PC unit sales have always grown, even with the slowdown after the tech bubble. The company estimates that PC unit sales will grow 5.3 percent in 2009, which is about as slow a year as 2002. That’s not terrible, given the economic environment, Rivet said. Graphics chip units are expected to grow about 4 percent to 5 percent.
7 days prior to SIAs forcast of a shrinking market
The outlook for semiconductors is so negative that an industry group said Wednesday it expects global chip sales to decline in 2009 -- something not seen in eight years.
The Semiconductor Industry Association estimates that chip sales around the world will fall next year to $246.7 billion, down 5.6% from this year's anticipated sales of $261.2 billion. Sales this year will be up about 2.2% from 2007
.......But shares recovered much of an 8 percent, premarket drop as investors and analysts, by now accustomed to the steady drum beat of bad technology news, seemed unfazed by the warning.
Cody Acree, an analyst with Stifel Nicolaus, said the market was not surprised given the state of the PC industry, which is being crippled by poor demand. AMD and chief rival Intel (INTC.O: Quote, Profile, Research, Stock Buzz), the world's largest chipmaker, make virtually all the microprocessors for the world's 1 billion PCs.
Acree said AMD has done a solid job of making itself more competitive with Intel. "I think this has nothing to do with AMD individually, this is fully macro," Acree said.......
Jon Peddie of Jon Peddie Research said all tech companies are going to suffer in the current climate, so he was not concerned AMD had unusual problems.
"How could they [AMD] defy gravity and no one else do it? It's not shocking or worrisome, actually."
So, not suprisingly, different analysts have different opinions, or variations of similar opinions, and the only fact out of the bunch is that AMD has officially cut its Q4 estimates by 25%. The revised estimate was announced with seemingly little or no effect on share prices by end of trading, but tommorow is another day, and what happens to the market and AMD with a full day of trading may have the analysts changing their tunes.
Well, I was more surprised that they didn't think it would drop (than it actually dropping). I mean, the chip that the media loves to say will save them is coming out in a month. Who'd buy a CPU right now (except those going i7) rather than waiting a month (even if PII isn't the best, it is likely to lower prices a little).