AMD break-up rumours persist as revenue estimates drop

'Weaker than expected consumer PC demand' is to blame

Chip-designer Advanced Micro Devices (AMD) has lowered its revenue estimates for the second quarter of 2015, re-igniting rumours that the company is to stage a break-up.

The company lowered its revenue estimate below analysts' average yesterday, saying it now expects "second quarter revenue to decrease approximately 8 per cent sequentially, compared to the previous guidance of down by four per cent, plus or minus three per cent".

The company's stock price plunged by 15 per cent almost instantly in response, with AMD's only reasoning for the decline being "weaker than expected consumer PC demand impacting on the company's Original Equipment Manufacturer (OEM) APU (accelerated processing unit) sales".

The shift in expectations also sees the company's gross margins reduced to 28 per cent, after a previous estimate of 32 per cent.

AMD's Computing and Graphics reporting segment is to be hardest hit, and a $33m one-time charge related to transitioning chip designs will also add to the company's misfortunes.

The company's statement is enough to resurrect rumours from June 2015 that AMD is planning to break the company up or otherwise spin off part of the business in order to try and get back onto an even keel. It spun-out its capital-intensive semiconductor manufacturing business, GlobalFoundries, in 2009.

A company spokesperson, however, told ExtremeTech that AMD has "no such project in the works" and will instead look at the gaming, "immersive" computing (i.e. virtual reality) and data centre infrastructure markets, rather than using its time and resources to try and compete in low-powered markets, such as entry-level notebooks and tablets.

"We don't need to do everything," CEO Lisa Su said during a session with analysts back in May. "We need to pick the things we can do very well."

AMD did, however, shut down its x86 micro-server business, SeaMicro, back in May. The company had been bought in 2012 for $334m.

It's debatable whether this strategy is going to work if AMD is pinning so many of its hopes so precisely on a market that has been somewhat moribund for years, but it's arguably still early days to say an attempted turnaround at AMD has failed.