Shares of Advanced Micro Devices (AMD) fell as much as 9% in early trading after the chip vendor slashed its second quarter sales outlook, which is now expected to fall 11% from the first quarter. The company originally expected revenue to be flat to up as much as 6% in its prior quarterly forecast.
The difference from the old guidance to the revised guidance issued Monday is $222 million. Its full second-quarter results are due on July 19.
AMD blamed “a weaker consumer buying environment” and “softer-than-expected channel sales” in China and Europe for the decline. Indeed a slowing world economy has affected consumer sales but the magnitude of AMD’s revenue miss is worrying. According to analysts the company is more exposed to a consumer slowdown than rival Intel because a higher percentage of its sales are to consumers.
But the mounting pressure from rivals is playing its part too. On the CPU side AMD has struggled to compete with Intel’s last few processor architectures and instead focused on the value proposition of its chips — they make a good argument but that isn’t scoring them many design wins in the all-important laptop market.
Meanwhile, competition with Nvidia on the GPU front remains as strong as ever, but the later recently gained a significant edge over AMD by securing multiple deals with Apple for the MacBook Pro. Nvidia is also doing way better in the mobile space with its Tegra 3 SoC, which powers a range of tablets and smartphones, including the $199 Google Nexus 7 and the upcoming Surface tablet from Microsoft.
AMD's shares have lost 40% of their value after a year-high in March and are currently trading at $5.05.