Friday, January 15, 2010

Advanced Micro Devices Inc. (NYSE: AMD): Q4 Earnings Preview 2009

Advanced Micro Devices Inc. (NYSE: AMD), the world's second largest chipmaker, is scheduled to release its financial results for first quarter of fiscal year 2009 after the market close on Monday, January 25, 2010. Analysts, on average, expect the company to report a loss of 18 cents a share on revenue of $1.49 billion. In the year ago quarter, the company reported a loss 69 cents per share on revenue of $1.16 billion.

Advanced Micro Devices, Inc., a semiconductor company, provides processing solutions for the computing, graphics, and consumer electronics markets in the United States, Canada, Europe, and Asia.

In October, the Sunnyvale, California-based company reported a third quarter loss of $128 million, or 18 cents a share, compared with a loss of $134 million or 22 cents a share in the year-earlier period. Revenue dropped to $1.4 billion from $1.8 billion. Analysts, on average expected the chip maker to report a loss of 42 cents a share on revenue of $1.26 billion. Third quarter 2009 AMD gross margin was 42%, compared to 37% in the prior quarter.

AMD expects its product revenue "to be up modestly for the fourth quarter of 2009."

The demand for chips improved in the second half of 2009 amid signs of economic stabilization. The release of Microsoft's (NASDAQ: MSFT) Windows 7 operating system in October and growing demand for consumer electronics also boosted chip sales. Global semiconductor sales rose to $22.6 billion in November, up 3.7% from October and up 8.5% year over year, according to the Semiconductor Industry Association. The SIA now predicts that worldwide industry sales will grow 10% in 2010, to $242 billion, and another 8% in 2011, to around $262 billion.

In November, AMD settled all outstanding legal disputes with Intel Corp. (NASDAQ: INTC), including anti-trust and patent cross license disputes, with latter agreeing to pay AMD $1.25 billion. In return, AMD agreed to drop all its regulatory complaints worldwide and all pending litigation, including a case in U.S. District Court in Delaware and two cases in Japan. In addition, AMD and Intel announced that they would obtain patent rights from a new 5-year cross-license agreement and will give up any claims of breach from the previous license agreement.

Following its agreement with Intel, the chipmaker augmented its balance sheet and announced moves that could potentially bring down its debt due in 2012 to $485 million and reduce its total debt by $890 million. AMD said it will use cash to redeem and retire roughly $390 million in high-yield debt due in 2012, and use cash and a new debt offering of $500 million of senior notes to be due in 2017 to tender for up to $1 billion on $1.485 billion of convertible notes due in 2012.

AMD shares got a boost last month after Intel's plan to launch its first standalone graphics chip suffered a setback. Intel announced in December that it was delaying indefinitely the release of a graphics chip based on its Larrabee architecture. Larrabee was designed to compete with GPUs from nVidia and AMD currently used in many desktop PCs. Meanwhile, Intel has also come under increased scrutiny because of incentives it provided to PC makers to hurt rivals like AMD. Last month, U.S. consumer watchdog Federal Trade Commission has sued Intel for allegedly using a dominant market position for a decade to stifle competition and to strengthen monopoly.

In terms of stock performance, AMD shares have gained 137 percent over the past year.

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