Event: Chip maker Advanced Micro Devices (NYSE: AMD) reported earnings on Thursday that underscored the argument that the PC is dying. AMD said it lost 21 cents per share for the quarter ending September. Analysts expected the company lose 22 cents per share. More worrisome for investors was a forecast for fourth-quarter revenues that missed expectations. AMD said it is on track for revenues of $1.1 billion for the quarter ending Dec. 31. That is well below the expectation for sales of $1.31 billion. AMD admitted that the pace of deterioration in the industry had been quicker than expected and said it is cutting its workforce by 15%. The stock, already trading lower, is down another 14% in morning trading on Friday.
Analysis: The news from AMD is not good whatsoever. Even worse, the news is not likely to improve any time soon. I’ve long said the computing power of a PC is substantially more than the average user ever could need or want. Now, there is a device that does exactly what people want in a way that people desire. The smart phones and tablets can be expected to continue to dominate the market. Will the PC chip industry adapt? We heard earlier this week how Intel (INTC) was responding to the threat by making chips for a long line of tablet-style devices. AMD will need to do the same or risk complete irrelevance. Even then, it is no slam dunk that these chip makers can compete with those already established in the smart phone/tablet market. This will be a long journey for AMD and no easy path to success. Its very survival is at stake.
Action: Stay away from AMD at all costs. As tempting it would be to catch a falling knife, this one might keep falling. At best, it treads water at these bankruptcy levels.
10 Surprise Blowout “Earnings” Picks for the Third Quarter
If you love to “ring”the trading bell with real winners, then grab this Sneak Preview of The Earnings Player’s 10 Surprise Blow Out Earnings Picks for the 3rd quarter earnings season. You can generate obscene profits of 100% to 600% from The Earnings Player’s picks in a matter of minutes. Get Your FREE Sneak Preview.