AMD Posts Bigger-Than-Expected Loss, Will Exit Dense Server Business

U.S. chipmaker Advanced Micro Devices Inc reported a bigger-than-expected adjusted loss and a steep fall in sales for the first quarter and said it expected weak demand for personal computers to continue for some time.

Shares of the company, which also said it would exit the dense server system business, fell more than 8 percent in extended trading on Thursday.

Chief Executive Lisa Su said the PC market would remain challenged as original equipment manufacturers focus on lean inventories.

The company, which said in October it would cut 7 percent of its workforce, has been shifting its focus to gaming consoles and low-power servers to combat falling laptop sales.

But progress has lagged Wall Street's expectations due to continued weak PC and graphic card sales as well as intense competition from Intel Corp.

Personal computer shipments fell 5.2 percent in the first three months of this year, extending three years of declines, according to research firm Gartner.

"It looks like the channel inventory dynamics that they have been struggling with for the past 2 quarters is continuing and their margins are under pressure," Raymond James analyst Hans Mosesmann said.

Su, however, said she expects business to pick up in the second half of the year, pivoting hopes on the release of Windows 10 and new product offerings by the company.

The dense server system business, formerly known as SeaMicro, helps firms reduce power consumption and improve space efficiency for data centres.

The company said it recorded a charge of $75 million in the first quarter related to the sale of the business as well as an additional $12 million charge related to a restructuring plan last year.

AMD's net loss widened to $180 million, or 23 cents per share, in the quarter ended March 28 from $20 million, or 3 cents per share, a year earlier.

Excluding items, AMD reported a loss of 9 cents per share, compared with the average analyst estimate of a loss of 5 cents, according to Thomson Reuters I/B/E/S.

Revenue fell 26.2 percent to $1.03 billion, missing analysts' average estimate of $1.05 billion.

AMD forecast current-quarter revenue to fall 3 percent, plus or minus 3 percent, from the first quarter.

That implied revenue of $999.1 million to $969.1 million, below analysts average estimate of $1.13 billion.

The company's shares were down 8.4 percent at $2.63 in trading after the bell.

© Thomson Reuters 2015