Ahead Of Advanced Micro Devices' Q4 Results

(RTTNews) - Semiconductor company Advanced Micro Devices Inc. (AMD) has been negatively impacted by the slowing demand for PCs and notebooks as tablets and smartphones gained prominence. The company is also losing market share to its larger rival Intel Corp. (INTC) and facing competition from Nvidia Corp. (NVDA).

Worldwide PC shipments declined 7.7% to 73.7 million units in the third quarter, according to research firm Gartner Inc. (IT). Desktop PCs continued to show weakness with a high-single-digit decline.

Meanwhile, the company has diversified its portfolio and currently also makes chips for video game consoles.

In fiscal 2016, the company expects to gain market share in graphic processing unit or GPU, PC, and embedded markets; ramp new semi-custom design wins; and launch "Zen" x86 high performance central processing unit or CPU for core for high-end desktops and servers - providing 40% more instructions per clock. The company is also focused on delivering next generation high-performance GPUs based on FinFET technology.

The company expects its fourth-quarter revenue to decline 10%, plus or minus 3%, sequentially, and non-GAAP gross margin to be about 30%. Fourth-quarter results are due to be released after market closing on January 19, Tuesday. Analysts polled by Thomson Reuters are estimating a loss of $0.10 per share and revenue of $954.74 million. Analysts' estimate typically exclude certain special items.

Over the longer-term, AMD looks forward to de-risk its debt maturity profile, reduced interest expense and allocate excess cash over 1 billion to reducing debt. Total debt at the end of the third quarter was $2.26 billion, flat from the prior quarter.

In the previous quarter...

The company incurred a net loss of $197 million or $0.25 per share for the third quarter compared to a profit of $17 million or $0.02 per share earned a year ago.

Non-GAAP net loss was $136 million or $0.17 per share versus a profit of $41 million or $0.05 per share reported last year.

Revenue amounted to $1.06 billion for the latest third quarter, lower than the previous year's revenue of $1.43 billion.

The company said its revenues dropped largely due to lower sales of client and graphics processor products and ongoing weak PC demand. Computing and graphics segment revenues dropped 46%, while enterprise, embedded and semi-custom segment revenues decreased 2% year-over-year.

Dr. Lisa Su, AMD president and CEO, said, "We continue to take targeted actions to improve long-term financial performance, build great products and simplify our business model. The formation of a joint venture of our back-end manufacturing assets is a significant step towards achieving these goals and strengthening our balance sheet."

Cash and cash equivalents were $755 million at the end of the quarter, down $74 million from the end of the prior quarter, due primarily to a $69 million debt interest payment.

ATMP Manufacturing Facilities JV

October 15, 2015, AMD announced signing of a definitive agreement to create a joint venture with Nantong Fujitsu Microelectronics or NFME that combines AMD's high-volume Assembly, Test, Mark and Pack or ATMP facilities and experienced workforce in Penang, Malaysia and Suzhou, China with NFME's established outsourced semiconductor assembly and test or OSAT expertise to offer differentiated capabilities and scale to service a broad range of customers.

This joint venture is part of the company's ongoing strategic plan to sharpen its focus on designing high-performance technologies and products that drive profitable growth.

The value of the transaction is $436 million and NFME will take an 85% ownership of the joint venture. AMD will receive $371 million in cash and expects net proceeds of about $320 million, net of taxes and other charges at close. This transaction is expected to close in the first half of 2016, pending successful completion of regulatory approvals.