Advanced Micro Devices will be releasing its Q4 and full year 2011 results on Tuesday, January 24. Like its rival Intel, which pleased investors on Thursday afternoon, there are certain broad market factors that are likely to impact its quarterly results.
Below we take a look at what investors can expect from AMD’s earnings. Apart from Intel, AMD competes with graphic chip designer Nvidia.
Our price estimate for AMD stands at $8.50, implying a premium of about 40% to the market price.
See our complete analysis for AMD
PC Slowdown In Q4 Can Impact AMD’s Results
Unlike the third quarter, Q4 2011 saw a global decline in PC sales by about 1.4% compared to Q4 2010. [1] Even the healthy growth in PC shipments in emerging markets could not compensate for the decline observed in the developed markets such as the U.S. and Europe. However, one could argue that AMD’s lower pricing could potentially moderate this impact as the company might be able to sell its microprocessors even in a weaker environment.
Supply Issues Combined With Hard Disk Shortage
Although the hard disk shortage that resulted from flooding in Thailand in October 2011 is likely to have a modest impact on AMD’s Q4 results, its combination with AMD’s own supply issues could make the impact more notable. Nevertheless, this factor may still remain on a moderate side compared to what we can potentially see in next two quarters.
The supply shortage could especially be a disadvantage for AMD as OEMs (original equipment manufacturers) will likely give priority to higher priced Intel PCs in situation of shortage.
Cost Measures Could Help
Last quarter AMD announced workforce cuts that implied laying off about 10% of the company's workforce. According to the company, approximately $128 million in overhead will be cut by year-end 2012.
An additional $90 million in savings will come from what AMD management refers to as "operational efficiencies." A portion of these savings could be visible in upcoming earnings results.
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Notes:
- Gartner Says Worldwide PC Shipments in Fourth Quarter of 2011 Declined 1.4 Percent; Year-End Shipments Increased 0.5 Percent, Gartner Press Release, Jan 11 2012 [↩]
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