July 9, 2012 / 8:53 PM / 5 years ago

AMD warns of 11 percent decline in revenue; shares slide

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

SAN FRANCISCO (Reuters) - Chipmaker Advanced Micro Devices AMD.N warned on Monday that its second-quarter revenue would be down about 11 percent from the prior quarter due to softer-than-expected sales in China and Europe and a weak consumer-buying environment, knocking its shares down 6 percent.

The company had previously forecast second-quarter revenue would increase 3 percent from the first quarter, plus or minus 3 percentage points.

Alex Gauna of JMP Securities said the weaker-than-expected sales in China reflect stronger chip updates by rivals NVIDIA (NVDA.O) and Intel (INTC.O).

"Both Intel and NVIDIA have out-executed AMD," he said.

On the Europe side, Gauna said the decline is nothing unexpected considering the current economic situation, but he said AMD has been dealt an especially hard blow because it has always played in the lower end of the computer market.

The warning comes after AMD posted a first-quarter loss of $590 million.

AMD faces growing competition from Intel's newest PC chip, code-named Ivy Bridge. Intel is also starting to build sales of its recently launched Romley server platform.

Sunnyvale, California-based AMD also has been launching new processors of its own, and recently appointed CEO Rory Read has vowed to improve on long-standing execution troubles.

AMD reiterated its prior guidance for its second quarter gross margin. It had said in April that gross margins would be flat to slightly up from the previous quarter.

Operating expenses for the second quarter will be about 8 percent less than prior guidance of $605 million, the company said.

Shares in AMD, a distant No. 2 to Intel Corp (INTC.O) in the PC market, declined almost 6 percent to $5.30 in after-hours trade, from a close of $5.62 on the New York Stock Exchange.

AMD is due to report financial results next Thursday. (Editing by Leslie Adler)

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