Advanced Micro Devices Posts Second Straight Revenue Increase--Update

By Maria Armental and Don Clark 

Advanced Micro Devices Inc. on Thursday reported a second consecutive quarter of higher sales, fueled by customized processors for videogame makers and demand for its latest graphics chips.

But the company saw its loss widen as it booked a $340 million charge tied to the most recent changes to its agreement with the company that manufactures most of the chips it designs. AMD also issued revenue guidance for the current quarter that was lower than analysts expected.

AMD's shares, which have more than tripled over the past 12 months, fell 6.5% to in after-hours trading.

The second-largest supplier of personal-computer processors after Intel Corp., AMD has reported four straight years of losses. AMD has struggled to gain market share against its larger competitor, while both companies have suffered from slowing PC sales. It has also been losing sales to Nvidia Corp., the other major supplier of graphics chips.

In one response, AMD has stepped up its efforts to supply chips used in gaming consoles sold by Sony Corp. and Microsoft Corp. That strategy paid off in the latest quarter; AMD said revenue in the unit that includes those chips rose 31%.

Meanwhile, the PC market has been improving slightly, while gamers have shown a willingness to pay for high-end graphics chips. AMD said its computing and graphics segment revenue rose 11% from the year earlier period.

The company hopes the business will grow faster based on a new processor design called Zen, which is expected to be available for PCs in the first quarter of 2017 and for servers in the second quarter.

Lisa Su, AMD's chief executive, said sample Zen chips have been greeted enthusiastically in both markets. "We have multiple customers on both the PC side as well as the server side," she said during a conference call with analysts.

Over all, AMD's third-quarter loss more than doubled to $406 million, or 50 cents a share. Revenue rose 23% to $1.31 billion, well above the company's projection. Excluding the charges tied to the changes to the Globalfoundries agreement and other items, AMD reported a profit of 3 cents a share, compared with a loss of 17 cents a year earlier.

Analysts surveyed by Thomson Reuters had projected the company would break even that basis on about $1.21 billion in revenue.

AMD's sales of custom chips are usually highest in the third quarter, as videogame console makers build systems ahead of the holiday season. Consequently, Ms. Su said, AMD expects revenue in the current to decline 15% to 21% from the third quarter. Analysts surveyed by Thomson Reuters had projected a 13% decline.

Write to Maria Armental at [e-mail] and Don Clark at [e-mail]

(END) Dow Jones Newswires

October 20, 2016 18:36 ET (22:36 GMT)

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