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Stock Analyst Update

Advanced Micro Devices Paints a Different Picture than Intel

Despite poor results, the firm sees light at the end of the tunnel.


What Happened?
Advanced Micro Devices (AMD) reported fourth-quarter earnings of $0.53 per share Wednesday evening. This was below First Call's consensus earnings estimate but within the $0.50-$0.60 range AMD gave when it issued a profit warning in early December. Sales growth during the quarter was down slightly compared with the prior quarter, but up 21% from the same period last year.

What it Means For Investors
We are still reasonably optimistic about AMD's prospects because of its improved product positioning versus Intel (INTC), but remain concerned given PC industry weakness and AMD's heavy reliance on the consumer desktop market. In fact, in the fourth quarter, microprocessor sales were down sequentially as AMD sold roughly the same number of units, but was hurt by lower average selling prices (ASPs). AMD's product mix is actually much more favorable than before, but it's not able to fully reap the rewards because of continued industry weakness. On the plus side, the firm’s faster-growing flash-memory unit helped offset some of the microprocessor weakness.

Jeremy Lopez does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.