AMD cuts sales forecast, blames weak economy

Advanced Micro Devices on Thursday cut its revenue forecast for the third quarter, saying a challenging economy hit demand for all its products.

The chip maker now expects revenue for the quarter ending Sept. 29 to be down about 10 percent from the second quarter. In a previous forecast, AMD said revenue would decline by no more than 4 percent, and might even increase slightly.

AMD said it was also affected by lower selling prices for its chips and poor utilization of its manufacturing facilities. It will take a US$100 million inventory charge for unsold products.

The write-off could be tied to its "Llano" Fusion chips, which started appearing in PCs in the middle of last year, said Nathan Brookwood, principal analyst at Insight 64.

AMD had supply and manufacturing issues with Llano and demand for the chip was poor. The company is doing better with a successor to Llano code-named Trinity, which became available in laptops and PCs in May.

AMD designs PC, server and graphics processors that are then manufactured by contract firms such as GlobalFoundries. Demand for PCs has been slumping, with IDC and Gartner reporting PC shipments in the third quarter dropping by 8.5 percent from a year earlier.

"The whole PC sector is under pressure. AMD is closely tied to PCs," Brookwood said.

AMD could benefit from Microsoft's launch of Windows 8, which will ship in PCs starting the end of this month, Brookwood said. Analysts think buyers have been holding off on PC purchases until the new OS arrives.

Agam Shah covers PCs, tablets, servers, chips and semiconductors for IDG News Service. Follow Agam on Twitter at @agamsh. Agam's e-mail address is agam_shah@idg.com