AMD Posts Quarterly Loss, Names New CEO
NEW YORK (Reuters) - Advanced Micro Devices Inc (AMD.N: Quote, Profile, Research, Stock Buzz) posted a wider-than-expected quarterly loss and named a new chief executive on Thursday, as the chipmaker struggled to regain market share from Intel Corp (INTC.O: Quote, Profile, Research, Stock Buzz).
But the appointment of Chief Operating Officer Dirk Meyer to succeed Hector Ruiz as CEO did not resuscitate AMD shares, which fell as much as 9 percent after the earnings report.
Ruiz, who is staying on as Chairman and has been grooming Meyer as a successor for two years, said there was no question that he was the best candidate for the job at AMD, which has posted net losses for seven consecutive quarters.
"He's watched me do all the screw ups that I did and understands much better the things that we need to do better, which an outside candidate cannot," Ruiz said in a telephone interview.
Meyer said he would focus on execution and reaching and sustaining profitability in his new job. Ruiz plans to keep working on AMD's asset-light manufacturing strategy and promised to announce details by the year end. AMD plans to use new partnerships to reduce manufacturing costs.
American Technology Research analyst Doug Freedman said some investors may be disappointed AMD chose from within its ranks, although he held out hope the move would foretell improving fortunes for the company.
"I think they probably are making the switch because they're seeing a light at the end of the tunnel. I think they've identified this as the trough," Freedman said, noting that AMD has new products that should soon help boost sales.
AMD has been losing market share to Intel and remains a generation behind its larger rival in chip-making technology.
It is banking in part on its Barcelona server microprocessor, now shipping in volume, to turn things around. That chip had been delayed by a flaw.
The company posted a second-quarter net loss of $1.19 billion, or $1.96 per share, compared with a year-ago net loss of $600 million, or $1.09.
Its quarterly loss included a $1.44 per share impairment charge for the write-off of some of the value of its 2006 purchase of graphics chipmaker ATI Technologies.
Its operating loss would have been 60 cents a share, excluding an unusual gain of 16 cents a share, compared with the average Wall Street expectation for a loss of 52 cents a share from analysts polled by Reuters Estimates.
Revenue rose to $1.35 billion from $1.31 billion a year ago but was down seven percent from the first quarter.
Charter Equity Research analyst John Dryden said the bottom and top line results were disappointing.
"Processors were weak. Graphics was in line. This led to weak margins and a shortfall to overall per share figure," said Dryden expected a gross profit margin of 41 percent compared with the 37 percent AMD reported.
AMD's results come two days after Intel posted a 25 percent gain in net profit as it extended gains in the notebook personal computer market. Intel also gave a revenue forecast for the current quarter that topped expectations.
"They're losing share to Intel and they haven't been able to reverse the losses in spite of new products across server, notebook and desktop," Dryden said.
AMD said that, while it was disappointed with its financial results, it remained committed to posting an operating profit for the second half of the year based on new products and continued action aimed at reducing its break-even point.
AMD said expects third-quarter revenue to increase in line with typical seasonal trends. It said the average seasonal increase would be between 8 percent and 10 percent.
It would not say whether it would post a profit in the third quarter, but said its break-even point for quarterly revenue would be $1.5 billion.
The shares of Sunnyvale, California-based AMD fell as low as $4.80 in late trading after closing up 24 cents at $5.30 on the New York Stock Exchange.
(Additional reporting by Duncan Martell in San Francisco;
Editing by Andre Grenon)
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