AMD's revenue decimated by poor demand
October 12, 2012 // 11:26 a.m.
AMD's latest financial results demonstrate just how much the company needs its latest Trinity accelerated processing units (APUs) to be a success: the company's revenue has dropped by 10 per cent quarter on quarter.
While the company had warned its investors that a dip was on the way, it drastically underestimated the extent of the problem: rather than the predicted one per cent revenue drop, the company's third quarter revenues are down 10 per cent compared to the previous quarter.
It's not just revenue, either. Margin - the profit made on each sale - is down to around 31 per cent, from a forecast 44 per cent. Although belt-tightening measures at the company helped trim operating costs by 7 per cent quarter-on-quarter, it's clear that something significantly more drastic is required to keep its investors on-side.
AMD has put the blame for the significant shortfall on a general slowdown in the market - with many people who would normally be buying new computers waiting for the release of Windows 8 later this month - along with a drop in demand for selected products. This latter gave AMD a serious hit to its margins, with an estimated $100 million inventory written down - suggesting AMD produced hardware on a volume which significantly exceeded demand.
Since announcing the results, investors have reacted surprisingly positively: although pre-market trading saw the company's stock drop by 8.13 per cent, it has since recovered to $3.20 per share - just $0.05 below its ending price on Tuesday.
The company can't rely on the generosity of investors for long, however. AMD is going to have to prove itself in the next quarter - which means further cost-cutting measures, smarter production schedules and a big push for its latest budget- to mid-range Trinity APU chips.