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AMD smacked by channel slump in Q2

Nearly 10 per cent drop

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The bean counters at AMD have done a first pass on the company's second quarter, and it is not looking so good.

The company said in a statement after Wall Street called it a day on Monday that revenues in the second quarter ended in June would fall by approximately 11 per cent sequentially from the first quarter.

AMD had previously told investors that sales would be somewhere between flat and up 6 per cent from the first quarter's sales, which hit $1.59bn and which declined by 1.7 per cent compared to the first quarter of 2011. (Technically, AMD said that it expected for overall sales to be up 3 per cent, plus or minus 3 per cent.)

"The lower preliminary revenue results are primarily due to business conditions that materialized late in the second quarter," AMD said in the statement, "specifically softer-than-expected channel sales in China and Europe as well as a weaker consumer buying environment impacting the company's Original Equipment Manufacturer (OEM) business."

In the second quarter of 2011, AMD had $1.57bn in sales, down 5 per cent year-on-year, and a net income of $61m, much better than the $43m loss it had in the prior year. That 11 per cent sequential decrease puts revenues in Q2 2012 at around $1.41bn, which works out to a 9.9 per cent year-on-year decrease. The revenue drop, in terms of percentages against last year's figures, is accelerating as 2012 goes on.

The good news for AMD is that gross margins are anticipated to be in the same range as was expected with the higher revenues, and that due to tightly controlled spending, operating expenses are about 8 per cent lower than the expected $605m that had been planned. That's about $48m in lower expenses, and that could mean the bottom line doesn't take so much of a hit.

AMD did not talk about whether it would turn a profit in the quarter, and said only that more details about Q2 would be revealed during its conference call with analysts after the market closes on July 19. ®

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