AMD Blames Poor Q2 Results on Channel Llano Sales
The chipmaker, which earlier this month warned investors it could post an 11 percent year-over-year revenue decline for the period, recorded $1.41 billion in sales, a 10 percent slide from last year, and earnings of $37 million during the quarter, a 39 percent tumble.
To frame the gloomy picture, AMD estimated third-quarter revenue would fall 1 percent from the second quarter, plus or minus 3 percent.
What caused AMD’s revenue shortfall, which, regrettably, prompted faint memories of its precipitous 33 percent Q4 2008 free fall? Rory Read, AMD president and chief executive, blamed, in part, weak channel sales of the chipmaker’s Llano desktop APUs, particularly in Europe and China — wounds, he suggested, the company may have self-inflicted with some questionable sales maneuvers.
“After a reasonable start, we saw business velocity slow in the later part of the quarter driving this revenue miss,” he said. “This second-quarter revenue shortfall was largely driven by two key factors: first, weak sales of desktop processors in the channel, primarily in China and Europe; and, secondly, a soft consumer PC market that impacted OEM notebook processor sales.”
In particular, it is in AMD’s Computing Solutions unit — where revenue fell 13 percent sequentially and year-over-year to $1.05 billion — that Read called out weak channel sales of the Llano APUs. He traced the problem to last year’s 32-nonometer supply constraints, to which AMD responded by prioritizing Llano shipments to OEMs, a cascading strategy that backfired on the chipmaker because channel partners now can’t locate enough motherboards.
“This clearly impacted Llano sales and built inventory in the channel,” Read said, pledging that “correcting our channel challenges with Llano is largely within our own control.”
He said going forward AMD will concentrate more on channel sell-through, first by keeping supply in the proper proportion and building stronger awareness in the channel of Llano’s value proposition.
Read also blamed the soft PC market for sluggish OEM notebook processor sales. In fact, don’t expect AMD to shine anytime soon — the new normal in the PC industry may be lower than expected, he said.
“For the first time since 2001, client PC shipments have declined sequentially for three consecutive quarters and have been below historical averages for the last seven quarters,” he said. “We expect macro headwinds will continue for the third quarter [and] we also believe the PC industry may be resetting to a new baseline and that full-year industry growth estimates will be reduced.”