As companies report their second-quarter earnings this week, chip maker Advanced Micro Devices (AMD) communicated its bad news: revenue is expected to drop by 11%. AMD's news release focuses on disappointing sales in China and Europe.
However, a writer for The Street criticizes AMD's analysis: "AMD blames its upcoming drop in revenue on just about everything out there, except its competition, Intel." While Dell and HP use AMD chips, Apple products switched to Intel a few years ago. AMD's news release is below:
"AMD (NYSE:AMD) today announced that revenue for the second quarter ended June 30, 2012 is expected to decrease approximately 11 percent sequentially. The company previously forecasted second quarter 2012 revenue to increase 3 percent, plus or minus 3 percent sequentially. The lower preliminary revenue results are primarily due to business conditions that materialized late in the second quarter, 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.
"The company expects second quarter gross margin to be approximately in line with prior guidance. Operating expenses for the second quarter are expected to improve and to be approximately 8 percent less than prior guidance of approximately $605 million, a result of tightly controlled expenses in the quarter.
"AMD will report second quarter 2012 results after market close on Thursday, July 19, 2012. AMD will hold a conference call for the financial community at 2:00 p.m. PT (5:00 p.m. ET) that day to discuss second quarter financial results and to provide information regarding expected third quarter results. AMD will provide a real-time audio broadcast of the teleconference on the Investor Relations page at http://www.amd.com. The webcast will be available for 10 days after the conference call."
- Find two or three other sources that explain why AMD's earnings report is disappointing. What's your view of the reasons for declining revenue?
- If you agree with The Street's assessment, should AMD have been more forthcoming? What are the arguments for and against a more straightforward discussion of the Apple and Intel relationship?