Advanced Micro Devices Inc. (NYSE: AMD) is scheduled to report third-quarter results after the market close on Thursday, October 15, 2009. Analysts, on average, expect the company to report a loss of 42 cents a share on revenue of $1.25 billion. In the year ago quarter, the company reported a loss of 11 cents per share on revenue of $1.78 billion.The chipmaker has not managed to post a profit in last 11 quarters. On July 21, 2009 AMD announced that it suffered a loss of $ 335 million for the second quarter of 2009.Revenue plunged 13% from $1.36 billion for the same period last year. The company has been hit hard by a slump in chip industry and has been fast losing its market share to industry leader Intel Corp. (NASDAQ: INTC).According to Gartner Inc., worldwide chip revenue is on track to drop 17% on a year-over-year basis in 2009. That projection is less severe than an earlier forecast of a 22% decline for the year. AMD posted a loss of $3.09 billion for FY 2008, while Intel's net income was $5.2 billion giving AMD a huge disadvantage when trying to allot money towards R&D ($5.722 billion by Intel compared to AMD's $1.84 billion). In the rapidly growing netbook market, where Intel's atom processor is the market leader, AMD still doesn't have presence.
A recent report by Mercury Research showed that AMD's market share slipped from 20.9 percent to 18.7 percent in the second quarter, lower than the 18.8 percent share the firm recorded in the second quarter of 2008. Intel, meanwhile, saw its share increase from 80.0 percent a year ago to 80.5 percent, up from 78.2 percent during the first quarter of 2009. Recent price war between Intel and AMD has taken a heavy toll on the latter. Because Intel is much bigger than AMD, it is able to cut costs more effectively and as a result the losses in profit margins do not affect Intel as severely. AMD's adjusted gross margin has plummeted from 45% in third quarter 2008 to 29% in second quarter 2009. The balance sheet of the company is far too debt burdened and actually has negative shareholder equity.
AMD recently spun off its manufacturing faculties, creating GlobalFoundries in a joint venture with the Advanced Technology Investment Co. and Mubadala Development Co., both of Abu Dhabi. The deal eased some of the financial pressure on AMD as it moved part of its debt to the new company.
Though there are few early signs of stabilization in chip industry a sustained recovery still remains elusive. Worldwide chip sales climbed for the sixth consecutive month in Agust, according to the Semiconductor Industry Association. However, chip sales were still down 16.1% year-over-year in August.
In terms of stock performance, AMD shares are down almost 32% since the beginning of the year. Shares of the chipmaker rose 37 or 6.72% to close at $5.88 on Friday.
Disclosure: Author doesn’t own any of the stocks discussed here.
