Losses hit AMD more heavily than expected

AMD announced a bigger than expected loss and a steep slide in margins yesterday, sending its shares spiralling by more than 12 per cent.

The company said second quarter gross margins dived to 37 per cent from 43 per cent in the previous quarter although it forecast chip revenues would rise just marginally in the current quarter.

Dirk Meyer, president and chief executive officer of AMD, said: "While we increased cash, exceeded our revenue plan and reduced operating expenses in the second quarter, gross margin was disappointing."

It's much larger rival Intel released its results last week but fared much better, excluding the prospect of an EU fine.

Meyer blamed AMD's limp margins on factory underutilisation, lower selling prices for notebook PCs, and an inventory sell off. But he hoped to turn that around in the second half of the year.

He said: "New platform, microprocessor and graphics introductions planned for the second half of 2009 position us well to improve margins and meet our financial goals for the year."

Investors had hoped rosy forecasts from Intel, and to a lesser degree IBM, signalled the tech industry slump might have hit bottom. Also on Tuesday, Apple blew past quarterly expectations, renewing hope that consumer demand was recovering.

AMD, which has struggled to safeguard its market share against Intel, reported a net loss in the second quarter, ending 27 June, of $335 million (204 million), or 49 cents a share.

Excluding certain items, AMD posted a 62 cent loss, compared with the 53 cent loss forecast by analysts, according to Reuters Estimates.

Revenue slid 13 per cent from a year ago to $1.18 billion from $1.36 billion, a tad above expectations of $1.13 billion.