Price decline pushes back AMD's Q4 results
By Colleen Taylor -- EDN, January 12, 2007
MPU maker Advanced Micro Devices Inc. (AMD) has hit a rough patch of sorts. The company said in a statement Thursday that although its Q4 revenue excluding ATI-related segments is expected to increase approximately 3 percent from the $1.33 billion reported in Q3, AMD's operating income is expected to be "positive but substantially lower" than in Q3.
According to AMD, the Q4 gross margin and operating income were impacted by what it called significantly lower microprocessor average selling prices in the quarter, which largely offset an increase in unit sales.
AMD is set to report its Q4 consolidated results after the market closes on January 23.
And clear skies aren't on the near horizon, according to investment firm Lehman Brothers. Admitting in a research note this morning that AMD's announced margin weakness is "substantially below even our lower end estimates," the firm said that it expects price pressure from Intel to remain on AMD through the first half of 2007.
Although Lehman has been very optimistic about AMD's Wall Street performance potential in recent weeks, the firm may be changing its tune. While it said it "remained encouraged" by AMD's strategy to broaden its offerings with chipsets and graphics and to expand in commercial and emerging markets, Lehman said its constructive longer term, view which has been based on AMD expanding its position in the MPU market, is currently "under review." The firm has thus reduced its price target to $21 a share, down from $24.
After closing last night at a price of $20.18, AMD's stock price took a dive this morning, trading at as low as $18.25, a more than 9 percent drop.
