UPDATE 3-AMD revenue beats Street but shares fall

* Q1 revenue $1.57 bln vs. Street view $1.54 bln

* Shares down 4.8 percent
(Adds CEO and analyst comments, adjusted gross margins, and
details on business; updates shares)

By Ian Sherr

SAN FRANCISCO, April 15 (BestGrowthStock) – Advanced Micro Devices
Inc (AMD.N: ) reported better-than-expected first-quarter revenue
as PC and server spending rebounded, but investors cashed out
of a rally triggered by stellar Intel Corp (INTC.O: ) results.

The company — which had posted 12 consecutive quarters of
losses until the previous quarter — said on Thursday its
second-quarter sales would be seasonally weaker, striking a
muted tone in contrast with Intel’s bullish comments on
corporate spending bouncing back in 2010.

Shares of AMD, which in Thursday’s regular session hit
levels not seen since November 2007, slid 5 percent as
investors sold out. The stock had added 8 percent since Intel’s
better-than-expected results. [ID:nN1382801]

“The stock was a little ahead of itself,” said Broadpoint
Amtech analyst Doug Freedman. He said the company’s real
earnings growth will come in the back half of the year.

In the meantime, “the company’s in a show-me mode,” he
said. “Investors want to see the earnings power.”

The company’s financials have been confusing for investors
since it spun off its chip manufacturing arm last year,
creating a private contract chip manufacturing company for
which AMD currently has a 30 percent stake.

Now called GlobalFoundries, the private contract
manufacturer has since expanded to create chips based on
designs by UK-based ARM Holdings PLC (ARM.L: ), while AMD has
continued to focus on chip design.

Debt-laden GlobalFoundries was a burden on AMD’s financial
statements for many quarters while the separation was
finalized. [ID:nN28234321]

GROWTH

AMD said its computer-chip design business’s revenue grew
23 percent from the previous year as manufacturers such as
Hewlett-Packard Co (HPQ.N: ) and Dell Inc (DELL.O: ) broadened the
number of computers they sold containing an AMD processing
brain.

Its graphics chip business also grew substantially,
increasing revenue 88 percent over the previous year, as the
company shipped more products to customers.

AMD said gross margins grew to 43 percent from 41 percent
the same time last year, when adjusted to exclude its former
chip making business. Gross margin for the seasonally stronger
fourth quarter was also 41 percent after adjustment.

The company said it targets gross margins between 40 and 45
percent for 2010, and expects that number to reach “beyond 45
percent” gross margin in the longer term.

“Customer interest in our platforms is very promising,”
said AMD’s Chief Executive Dirk Meyer. “The cash generation
potential of the business is beginning to be realized and we
are improving our balance sheet.”

Revenue rose to $1.57 billion, above the average Wall
Street expectation of about $1.54 billion, according to Thomson
Reuters I/B/E/S.

Net income rose to $257 million, or 35 cents per share, in
its fourth quarter ended March 27, after a loss of $416 million
in the year-ago period.

The company’s results also included a one-time non-cash
gain of $325 million from AMD’s stake in GlobalFoundries.

The chip maker said it expects revenue to be roughly flat
to down 5 percent in the current second quarter.

Shares of the Sunnyvale, California-based company fell 4.5
percent to $9.70 after closing at $10.16, gaining 2.7 percent
in the regular session on the New York Stock Exchange.

Stock Investing

(Reporting by Ian Sherr; Editing by Gary Hill and Matthew
Lewis)

UPDATE 3-AMD revenue beats Street but shares fall