Advanced Micro Devices Inc (AMD) surprised investors with a sharply reduced loss for the third quarter as the computer chipmaker received a large lump sum for licensed technologies. Its shares soared in extended trading.
Even without the licensing fees, the company apparently outdid low expectations thanks to strong sales. The results provided a contrast to solid but unspectacular results for the quarter reported by its much larger rival, Intel Corp, and gave some reassurance to investors nervous about the prospects for the highly cyclical semiconductor industry as the economy slows down.
AMD’s shares jumped US$0.40, or 10 percent, to US$4.52 in after-hours trading following the release of the results.
The Sunnyvale, California-based company on Thursday reported a loss of US$67 million, or US$0.11 per share, last quarter. It lost US$396 million, or US$0.71 per share, in the year-ago quarter. The company has reported a string of steep losses in the last year as it struggles to compete with Intel and digested the acquisition of graphics chipmaker ATI.
Revenue rose 14 percent to US$1.78 billion, helped by US$191 million in technology licensing fees related to the earlier sale of older manufacturing equipment to a Russian firm. Excluding the fees, revenue rose 1.7 percent.
On a conference call with analysts, chief financial officer Robert Rivet said the large amount in licensing revenue was largely a one-time event and future fees would be much lower.
Excluding losses from discontinued operations, amortization and restructuring charges, AMD said it earned US$80 million, or roughly US$0.13 per share. Analysts polled by Thomson Reuters on average expected the company to lose US$0.40 per share last quarter, but they were not counting on the licensing fees in their estimates.
The analysts were expecting revenue of US$1.48 billion, well below AMD’s US$1.59 billion excluding licensing fees.
AMD’s gross margin, a crucial measure for semiconductor manufacturers, was 45 percent excluding licensing fees, again above analyst expectations of a margin of 41 percent.
“This past quarter was a good one for us in number of ways,” chief executive Dirk Meyer told analysts. “We’re on a path to becoming the company we aspire to be.”
For the current quarter, AMD expects revenue to be flat from the third quarter’s figure excluding licensing fees. The fourth quarter is normally a strong one for the company, but Meyer said management was being cautious because of the economic environment.
The company recently disclosed plans to spin off its manufacturing into a joint venture with investors in Abu Dhabi. The move lets the company raise the billions of dollars necessary to keep the equipment competitive with Intel.
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