AMD misses earnings targets and writes down $65M in inventory

Advanced Micro Devices continues to struggle amid declining PC sales and tough competition with rival Intel.

AMD reported revenue of $1.06 billion (on a non-GAAP basis) in the third quarter ended September 30, compared with $1.43 billion a year earlier. Net loss was $136 million, or 17 cents a share, compared with a profit of $41 million, or 5 cents a share a year ago. Analysts had expected a non-GAAP loss of 12 cents a share.

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AMD said that it had a $65 million write-down of inventory for older-generation accelerated processing units (APUs), resulting in an impact of 8 cents a share charge. In the quarter, AMD saw higher semi-custom chip sales (such as sales of video game console chips), but computing and graphics chip sales were down compared to a year ago.

AMD also said it has entered into a $436 million agreement with Nantong Fujitsu Microelectronics (NFME) to create an Assembly, Test, Mark and Pack (ATMP) joint venture. AMD will contribute two of its test factories with 1,700 employees to the joint venture, which will be 85 percent owned by NFME, and NFME will pay $371 million in cash to AMD. The deal will close in the first half of 2016.

For the fourth quarter, AMD expects revenues to fall 10 percent sequentially from the third quarter, due to a seasonal decline in semi-custom chip sales. Computing and graphics segment revenue is expected to increase sequentially, and non-GAAP gross margin is expected to be 30 percent. AMD expects cash to be flat at about $750 million. AMD is laying off about 5 percent of its staff.