Advanced Micro Devices (NYS: AMD) isn't reporting third-quarter earnings for another couple of weeks. That didn't stop the second-largest maker of PC-compatible processors from jumping the gun with a preliminary tally last night.
AMD reduced its sales expectations for the third quarter from about $1.73 billion to roughly $1.65 billion, blaming manufacturing issues at its spun-out production arm, now known as GLOBALFOUNDRIES.
A slow ramp-up of next-generation manufacturing technologies has limited the supply of AMD's newest and most profitable processors. Moreover, the problematic production lines also share some tools with facilities to make older products, which slowed down production of last-generation chips as well. And the very newest server chip, codenamed Interlagos, shipped later in the quarter than AMD had planned, tightening the revenue and margin belts again.
This matches up with independent market reports from the likes of IHS iSuppli, which point to market-share gains at Intel (NAS: INTC) during the quarter. But iSupply gave credit to Intel's strong Sandy Bridge design rather than to AMD missteps. The release didn't bemoan lacking sales in the graphics division, which is mildly bad news for chief rival NVIDIA (NAS: NVDA) .
In fact, AMD presents this as a completely manufacturing-driven problem as the company struggles to keep pace with high demand. That's good news when the PC industry as a whole is buckling under pressure from newfangled smartphones and tablets. Systems-building market leader Hewlett-Packard (NYS: HPQ) recently promised to sell its PC division (just before sacking the CEO who made that decision), and Dell (NAS: DELL) puts a heavy focus on big-iron server systems these days. Apparently, someone wants to buy plenty of AMD's notebook and desktop chips anyhow.
I sold my AMD shares about six weeks ago, so I'm not sharing the pain of today's 16% share-price drop. You could call it dumb luck, since there's no way I could have foreseen a manufacturing problem. But these issues were common before ex-CEO Dirk Meyer took the reins and were very rare during his reign. I still think that kicking Meyer out was a monumental mistake, and I wish his replacement, former Lenovo COO Rory Read, the best of luck filling Meyer's shoes. I'll be watching from the sidelines. Using our Watchlist feature, you can do the same:
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At the time thisarticle was published Fool contributorAnders Bylundholds no position in any of the companies discussed here. The Motley Fool owns shares of Texas Instruments and Intel and has bought calls on Intel.Motley Fool newsletter serviceshave recommended buying shares of NVIDIA, Intel, and Dell, writing puts in NVIDIA, and creating a diagonal call position in Intel. Try any of our Foolish newsletter servicesfree for 30 days. We Fools don't all hold the same opinions, but we all believe thatconsidering a diverse range of insightsmakes us better investors. You can check outAnders' holdings and a concise bio, follow him onTwitterorGoogle+, or peruseour Foolish disclosure policy.
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