Thursday, April 8, 2010

Advanced Micro Devices Inc. (NYSE: AMD): Q1 Earnings Preview 2010

Advanced Micro Devices, the second largest chipmaker in the world, is scheduled to release Q12010 earnings after the market close on Thursday, April 15, 2010. Analysts, on average, expect the company to report a loss of $0.10 per share in the first quarter with estimates ranging from a loss of $0.27 to a profit $0.04 per share. Revenues for the quarter are estimated to be $1.53 billion. In the Q12009, AMD reported a loss of $0.66 per share on revenue of $1.18 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 the preceding Q42009, the Sunnyvale, California-based company reported that it swung to a profit of $1.18 billion or $1.52 per share, compared to a net loss of $1.44 billion, or $2.36 per share, in the prior-year quarter. On an adjusted basis, the company posted a loss of $57 million, compared to a loss of $424 million in the year-ago quarter. Revenue jumped 42% to $1.65 billion from $1.16 billion in the same quarter last year. Analysts, on average, expected the company to report a loss of $0.18 per share on revenue of $1.49 billion.

The chip maker said in January it will stop including results from its spun-off manufacturing operations in the latest quarter, a development that analysts expect to make it easier for AMD to remain profitable. The company will recognize a one-time, non-cash gain of $325 million related to its deconsolidation of GlobalFoundries Inc. for the quarter ended March 27, according to a regulatory filing with the Securities and Exchange Commission.

For the first quarter of 2010, AMD expects revenue to be down seasonally, operating expenses are expected to be approximately $550 million through the salary reinstatement performance related accruals in some R&D project expenses, and taxes expected to be approximately $3 million.

The company expects gross margin to be in the range of 40 to 45%; SG&A to be in the range of 14 to 17% of sales; depreciation and amortization to be in the range of $340 million to $370 million; capital expenditures to come in at approximately $120 million; profitability on an operating income levels throughout the year and free cash flow to be positive.

The chipmaker is likely to benefit from a strong rebound in worldwide PC shipments, signaling an economic recovery. With the economic recovery picking up, PC shipments this year will grow by 12.6% year-over-year to 333.2 million units, according to IDC's forecast. The Semiconductor Industry Association predicts that worldwide industry sales will grow 10% in 2010, to $242 billion, and another 8% in 2011, to around $262 billion.

The company has managed to gain market share in recent months. It's share of sales of microprocessor chips -- the brains of a computer -- amounted to 12.1 percent, a gain of 1.6 percentage points from the year-ago fourth quarter, according to the industry tracker IDC.

Late in March, AMD rolled out its much-anticipated 12-core “Magny-Cours” Opteron chip. A number of OEMs, including HP, Dell, Acer, SGI and Appro, are launching servers based on the new AMD chips. Both AMD and Intel are positioning themselves for the expected refresh of corporate servers, as businesses look to replace older systems that they have been holding on to because of the drastic cutbacks in IT spending due to the global recession.The demand for new processors may also get a boost from escalating trend towards cloud computing and virtualization. Broadpoint Amtech projects server sales of approximately 14.1 million units this year, up 19 percent year-over-year and from its previous estimate of 13.9 million units. It expects more action in the first half of the year, with the second half cooling off to 7 percent and 5 percent year-over-year growth in the third and fourth quarter, respectively.

Among other developments during the quarter, Advanced Micro Devices Inc. has renewed its patent license agreement with Rambus Inc.. The original term of Advanced Micro Devices' agreement runs through the end of September this year. The renewal extends the patent license through the third quarter of 2015.

In terms of stock performance, AMD shares have lost nearly 3 percent since the beginning of the year.

Full Disclosure: None.
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