Chipmaker AMD says resolving output problem

Thu Oct 27, 2011 7:15pm EDT

A new AMD Opteron 6000 series processor is seen on a motherboard during a product launch in Taipei April 14, 2010.  REUTERS/Pichi Chuang

A new AMD Opteron 6000 series processor is seen on a motherboard during a product launch in Taipei April 14, 2010.

Credit: Reuters/Pichi Chuang

(Reuters) - Advanced Micro Devices Inc (AMD.N) forecast higher fourth-quarter revenue as it recovers from a manufacturing setback that has pinched the supply of its new personal computer processors.

AMD, a distant second to Intel Corp (INTC.O) in selling microprocessors that are the brains of PCs, said it was working with manufacturing partner GlobalFoundries to resolve the problem affecting its new 32 nanometer Llano chips as well as older 45 nanometer chips.

"We are already seeing steady improvement day after day, week after week, but we are not out of the woods yet," recently appointed Chief Executive Rory Read told analysts on a conference call.

That progress helped the Sunnyvale, California company give a forecast for current-quarter revenue that beat most analysts' expectations, even as AMD faces a shaky economy and weak consumer demand.

"They're gradually improving. Clearly their biggest problem in the quarter was supply-related and going forward my sense is they'll have a healthier supply level in the current quarter and beyond," said Patrick Wang, an analyst at Evercore Partners.

Intel said last week that brisk growth in first-time PC purchases by families in emerging markets like China was helping make up for soft demand for laptops in the United States and Europe.

That emerging markets strength is supporting sales of companies that make chips for PCs, while other parts of the chip sector suffer more from the slow economy.

"Just about everyone else in semiconductors is guiding for down 10 percent for the fourth quarter so anyone that's guiding up is seeing a different market," said Stifel Nicolaus analyst Kevin Cassidy.

SUPPLY-CHAIN OK

AMD does not expect a shortage of hard drives caused by recent flooding in Thailand to impact the PC supply chain and hurt business in the current quarter, Chief Financial Officer Thomas Seifert said on the call.

Like Intel, AMD has failed to gain traction in increasingly popular mobile gadgets like Google Inc's (GOOG.O) Android smartphones and Apple Inc's (AAPL.O) iPad, which some people are buying instead of laptops.

In August, AMD hired Read, replacing Dirk Meyer, who left in January partly due to differences with the board of directors over the company's mobile strategy.

AMD said revenue in the third quarter rose 4 percent from the year ago period, to $1.69 billion.

AMD said revenue in the fourth quarter ending in December would rise 3 percent compared to the previous quarter, plus or minus 2 percentage points, equivalent to $1.71 billion to $1.77 billion.

Analysts on average expected fourth quarter revenue of $1.71 billion, according to Thomson Reuters I/B/E/S.

Non-GAAP earnings in the quarter were $110 million, up from $108 million in the year-ago period. Non-GAAP earnings per share were unchanged at 15 cents, beating expectations of 10 cents.

The company reported a net profit of $97 million, after a year ago loss of $118 million.

Shares of AMD rose 4.8 percent in extended trade after closing up 8.63 percent to $5.54.

(Reporting by Noel Randewich; editing by Carol Bishopric and Richard Chang)

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