Weak channel sales hit AMD results

Chip maker admits decision to prioritise OEMs for its Llano chips hurt its channel business in Q2

AMD has blamed a 10 per cent drop in revenue on poor desktop channel sales and the soft consumer PC market.

Supply difficulties prompted the chip maker to prioritise OEM customers when doling out supplies of the Llano chips it launched last summer.

Chief executive Rory Read, who admitted the quarter was "disappointing", said this had depressed desktop sales in the channel.

"As a result [of us prioritising OEMs], channel partners saw a dramatic change in supply linearity and a misalignment with motherboard availability," he said in a Q2 conference call, a transcript of which can be found here. "This clearly impacted Llano sales and built inventory in the channel."

Read also highlighted the soft consumer PC market in his explanation as to why sales for the period to 30 June fell to $1.41bn (£900m), down 10 per cent from last year and 11 per cent sequentially.

"As the slowdown accelerated late in the quarter, OEMs responded quickly in an effort to reduce their inventory exposure at retailers and limit their on-hand inventories. We made the decision to protect our notebook margin and not chase lower-margin business as the environment weakened at the end of the quarter," he said.

AMD's net profit hit $37m during the quarter, compared with $61m a year earlier.

Steve Bland, sales director of AMD Platinum partner KMS Components, said he had seen no slowdown in AMD sales in recent quarters.

"We are hearing that AMD sales are down but as a company we exceeded our quarterly targets with AMD. Its core range seems to be performing on target," he said.

However, Read issued a gloomy prognosis for the PC market for the rest of the year.

"We expect macro headwinds will continue for the third quarter," he said. "We also believe the PC industry may be resetting to a new baseline and that full-year industry growth estimates will be reduced."