AMD warns of slowing revenue growth

AMD, the second-largest PC microprocessor maker, warned that growth in its third-quarter revenues would be half of what it expected following chipmaking problems.

The news drove its shares down more than 8 per cent to $5.64 in extended trading in New York on Wednesday.

The Silicon Valley company said production quality levels or “yield” at its Globalfoundries plant in Dresden, Germany, had affected the ramping up of production of its Llano processors, made with circuits just 32 billionths of a metre wide. Supplies of 45-nanometre chips had also been hit by manufacturing problems.

As a result, the company expects to announce revenue growth of about 5 per cent compared with the second quarter, when it reports third-quarter earnings on October 27. Its previous guidance was for 10 per cent growth.

Gross margins are expected to be 44 to 45 per cent, compared with its earlier forecast of 47 per cent, due to fewer of the higher-margin Llano chips being sold.

Margins have also been affected by shipments of its next-generation server processor, codenamed Interlagos, happening later in the quarter than anticipated.

AMD divides the PC microprocessor market with Intel, but its bigger rival had a 79.3 per cent market share in the second quarter, with AMD gaining 1.5 percentage points on the first quarter to 20.4 per cent, according to the IDC research firm.