AMD reports loss, stock drops
Chipmaker decides to exit dense server systems business.
Advanced Micro Devices has a net loss of $180 million for the first quarter, and the company says it’s getting out of the dense server business.
Advanced Micro Devices had a net loss of $180 million for the first quarter, and the chipmaker said it’s getting out of one of its server businesses.
AMD’s revenue of $1.03 billion was down 26 percent, year over year. That was due primarily to lower product sales, the company said.
AMD also said it’s exiting the dense server systems business, formerly SeaMicro, “as a part of our strategy to simplify and sharpen the company’s investment focus.” That will result in special charges of $75 million in the first quarter.
AMD’s adjusted net loss was 9 cents per share. That missed Wall Street expectations, as analysts surveyed by Zacks Investment Research had pro- jected a loss of 6 cents per share.
The company’s stock dropped in after-hours trading, down more than 7 percent to $2.66 a share.
“Under the backdrop of a weaker than expected PC market, our first quarter results demonstrate that we continue making progress in some areas of our business, but still have work to do to improve our overall financial performance,” AMD CEO Lisa Su said.
Lower PC shipments industry-wide have almost certainly impacted AMD’s bottom line, as well. PC makers shipped 71.7 million computers in the first quarter, down 5.2 percent from a year earlier, according to research firm Gartner.
The earnings news comes after AMD reported a net loss of $364 million for the fourth quarter. The company expects revenue to drop 3 per-
cent sequentially in the second quarter.
“Looking forward in the year, given the ongoing macroeconomic and currency uncertainties, it is hard to predict when the PC environment will normalize,” Su said.
AMD’s formal headquarters are in Sunnyvale, Calif., but Austin is where most of its senior executives live and much of its engineering is done. The company, one of the world’s largest chipmakers, has about 2,000 employees in Central Texas.
The chipmaker has been dealing with weaker revenue and profits for some time. AMD has seen its stock market value halved since 2011 as the company has lost market share to much-larger rival Intel Corp.
It has been expanding into new markets such as game consoles and low-power servers, but progress has been slower than demanded by Wall Street.
Analyst Patrick Moorhead of Moor Insights & Strategy called it a “really good move” to get out of selling dense server systems because it was competing against some of its chip customers with their own servers.
“What I’m reading into this is they’re going to ... stop competing with their customers with SeaMicro to improve their chance at selling more chips.”
As for the revenue drop, Moorhead blamed the industry-wide drop in PC shipments, which hurt AMD.
“I think what’s happening right now is you have a new CEO right now who is realigning the company in a direction that she and the board want to take this,” he said. “What I see is a real focus on some of the basics — which is products, products and simplification.”