Advanced Micro Devices isn’t enjoying a good week. The company posted a negative pre-announcement of its second quarter earnings, resulting in a 4x as much trade volume on Wall Street, dropping over 11% in value.
The negative pre-announcement for the Second Quarter 2012 earnings came with the news that channel business failed to deliver in China and Europe. Furthermore, the consumer environment is still very soft on global markets. According to the revised revenue guidance, AMD expects 11% less revenue when compared to the first quarter which ended with $1.59 billion. Thus, the new forecast pitches revenue at about $1.41 billion at the time when analysts expected to see AMD posting revenue of $1.61 billion. This 200 million dollar shortfall between expected and what seems to be reality sent stock tumbling down to the level of announced revenue loss.
As you can see on the screenshot above, AMD tumbled down to $4.99 (taken at 2:55PM Eastern) or 11.21% drop, with other technology stocks impacted as well. Seeing AMD’s overall market cap down to $3.5 billion is 40% less than what AMD began the year with which only goes to show that the times of AMD being just a chipmaker are slowly, but certainly – drawing to a close.
With Apple selecting NVIDIA to power its notebooks, Google selecting NVIDIA for its Galaxy 7 tablet (less than a year after Google threw NV in favor of TI), Microsoft selecting Intel and NVIDIA over AMD and Qualcomm for its Surface tablets – it is obvious that AMD missed on a lot of opportunities to ship millions and millions of its chips.
We feel that AMD needs to branch out outside of its core business to strengthen its ecosystem and offer solutions that competitors don’t have at the moment, but only time will tell can they pull these things through internal company politics. Yesterday’s pre-announcement and today’s stock free-fall only goes to show that the company needs to work harder on advertising its strengths.
Given that AMD is significantly impacted by retail and etail market, any weakness in economy will reflect on the chip manufacturer. The company needs to hit the business market hard, especially the GPGPU sector where NVIDIA is enjoying the fruits of their labor. AMD Opteron, FirePro and FireStream need to seriously step up.