Thursday, April 21, 2011

Advanced Micro Devices (NYSE: AMD): Q1 Earnings Preview 2011

Advanced Micro Devices, Inc. (NYSE: AMD) is scheduled to release first quarter earnings after the closing bell on Thursday, April 21, 2011. Analysts, on average, expect the company to report earnings of 5 cents a share on revenue of $1.61 billion. In the year ago quarter, the company reported earnings of 9 cents per share on revenue of $1.57 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 fourth quarter, the Sunnyvale, California-based company's net income was $375 million or $0.50 per share, compared to $1.18 billion or $1.52 per share, in the year-ago quarter. On an adjusted basis, the company earned 14 cents a share in the fourth quarter. Revenue remained flat with last year at $1.65 billion. Analysts, on average, expected the company to report earnings of 11 cents per share on revenue of $1.63 billion.

At its last earnings call in January, the company said that that it was seeing better-than-seasonal demand in the first quarter, expecting revenue to be flat to down about 4% from the fourth quarter's $1.65 billion. The company stunned investors in January with news that its chief executive, Dirk Meyer, was stepping down immediately, and it hasn't yet named a successor.

US chip makers have posted stronger results recently, with companies seeing significant boosts because of high demand from businesses or for smartphones. And analysts expect more of the same in the most recent quarter, pegging most of the bigger companies for better results than last year. Still, consumer demand for personal computers was weak in the fourth quarter and hasn't particularly shown signs of ramping up in the first--Gartner Inc. (IT) in March cut back its growth forecast for personal-computer shipments, though it did say it expected mobile PC alternatives like Apple Inc.'s (NASDAQ: AAPL) iPad to continue taking share. 

In addition, worries about constrained supplies from Japan following last month's earthquake and tsunami have hit the sector. While Japan isn't expected to hurt chip makers' first-quarter results, the full impact still is unknown and could show up in guidance.

AMD's latest Fusion technology coupled with the early Intel Sandy Bridge recall, have given AMD a great boost. AMD is now set to launch its Llano APU second quarter of 2011 to compete with Intel’s (NASDAQ:INTC) Sandy Bridge. AMD’s Llano maintains lower power consumption and performs better when there is multi-tasking involved with heavy video or graphic processing. The new chips may help AMD bounce back in one particularly important segment: notebook processors.

Meanwhile, AMD’s market share in server microprocessors has fallen from its peak of about 25% in 2006 to a mere estimated 7% in 2010. In notebooks, AMD only holds an estimated 13.6% market share. On top of this, the company is not competitive in the mobile space to challenge Intel’s Atom yet. The company is now hiring Android driver development engineers, which shows that the company is clearly looking to make a significant push into mobile computing. AMD’s Brazos platform for mobile devices could well challenge Intel’s Atom in netbooks.

In February, Apple Inc. said that its updated MacBook Pro notebooks will feature the chip company’s graphics processors. The announcement was a major boon to AMD, which has struggled lately from stiffer competition with rival Intel Corp. (NASDAQ: INTC).  

Starting from the first fiscal quarter , the chipmaker announced that of 2011, the company will begin accounting for its investment in GlobalFoundries Inc. under the cost method and will no longer recognize any share of GlobalFoundries' net income (loss) in its statements of operations. 

The company's stock currently trades at a forward P/E  (fye Dec 25, 2012) of 11.57 and PEG ratio (5 yr expected) of 1.39. In terms of stock performance, AMD shares have lost nearly 15 percent over the past year. 

Full Disclosure: None.
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