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Advanced Micro Devices Inc. headquarters in Sunnyvale, Calif.


Chip maker Advanced Micro Devices Inc. warned on Monday that its second-quarter revenue would be down about 11 per cent from the prior quarter due to softer-than-expected sales in China and Europe and a weak consumer-buying environment, knocking its shares down 6 per cent.

The company had previously forecast second-quarter revenue would increase 3 per cent from the first quarter, plus or minus 3 percentage points.

Alex Gauna of JMP Securities said the weaker-than-expected sales in China reflect stronger chip updates by rivals NVIDIA and Intel Corp.

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"Both Intel and NVIDIA have out-executed AMD," he said.

On the Europe side, Mr. Gauna said the decline is nothing unexpected considering the current economic situation, but he said AMD has been dealt an especially hard blow because it has always played in the lower end of the computer market.

The warning comes after AMD posted a first-quarter loss of $590-million (U.S.).

AMD faces growing competition from Intel's newest PC chip, code-named Ivy Bridge. Intel is also starting to build sales of its recently launched Romley server platform.

Sunnyvale, Calif.-based AMD also has been launching new processors of its own, and recently appointed chief executive officer Rory Read has vowed to improve on long-standing execution troubles.

AMD reiterated its prior guidance for its second quarter gross margin. It had said in April that gross margins would be flat to slightly up from the previous quarter.

Operating expenses for the second quarter will be about 8 per cent less than prior guidance of $605-million, the company said.

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Shares in AMD, a distant No. 2 to Intel in the PC market, declined almost 6 per cent to $5.30 in after-hours trade, from a close of $5.62 on the New York Stock Exchange.

AMD is due to report financial results next Thursday.

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