AMD shares drop on long-term concerns
* Shares down about 13 percent
* Investors concerned about long-term outlook
By Ian Sherr
SAN FRANCISCO, Jan 22 (Reuters) - Shares of Advanced Micro Devices Inc (AMD.N) plunged on Friday as investors worried about both the company's latest confusing financials statements and long-term challenges that lay ahead.
On Thursday, AMD's quarterly earnings beat Wall Street's view and it posted better-than-expected revenue on strong holiday spending and increased server chip business, but investors were left confused over the company's complicated financial statements.[ID:nN2182795]
The chip-design company said it would clarify its financials in the next quarterly release, as it de-consolidated its spun-off chip manufacturing business, now called GlobalFoundries.
"Clearly there's uncertainty," said FTN Equity Capital Markets analyst Joanne Feeney, adding that AMD's share volatility mirrors conditions throughout the semiconductor industry. "People are (unsure) about how much the economic recovery is taking hold and how that affects earnings estimates."
The sector has also taken a hit, with the Philadelphia Semiconductor Index .SOXX sinking more than 6 percent since Intel Corp (INTC.O) kicked off the tech earnings season.[ID:nN15228962]
Some analysts couldn't make sense of why AMD in particular had dropped, since its results beat street expectations and its revenue forecast was "down seasonally."
"AMD matched in many metrics what Intel did," said Raymond James analyst Hans Mosesmann, adding that AMD even bested Intel's earnings with surprise growth in its graphics chip business.
Mosesmann also said the de-consolidation of AMD's financials should help investors better see the company's future potential earnings power.
But the chip-design firm is still troubled by competition from industry-leader Intel, which has seen particular success as of late in both the high-volume netbook and high-margin server markets. Additionally, AMD faces pressure from Nvidia Corp (NVDA.O), whose graphics-intensive chipsets, or collections of chips for computers, have increased the company's visibility.
"There is likely no shortcut for AMD to regain market share in CPU," Auriga analyst Daniel Berenbaum wrote in a Friday note to investors, adding that he does not see a compelling product cycle with the company's next-generation architecture that is expected to combine the microprocessor -- or computer's brain -- with graphics capabilities.
With that and the company's past missteps considered, Berenbaum wrote, "we have low confidence in AMD's design and manufacturing execution."
Shares of AMD were down 12.7 percent to $7.85 on the New York Stock Exchange.
(Reporting by Ian Sherr; Editing by Bernard Orr)
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