Fab-Lite Model at AMD Bites Back (AMD, INTC, HPW, DELL)

Advanced Micro Devices, Inc. (NYSE: AMD) has some good news and some bad news.  The bad news is that it is going to miss its third quarter sales and income targets.  The good news is that this looks to be due its own situation rather than something ominous that would drag down the larger Intel Corporation (NASDAQ: INTC).  It also is not an imediate omen for Hewlett-Packard Co. (NYSE: HPQ) and Dell Inc. (NASDAQ: DELL).

AMD blamed a manufacturing glitch for its miss, and the new target is 4% to 6% growth versus a prior target of closer to 10% sequential growth.  Gross margin will also fall to about 44% to 45% rather than a 47% target previously offered.  The blame lies with the Globalfoundries plant in Germany.

Having a fab-lite model is great, when the factories are working properly.  In this case, not so much.

AMD shares are down 9.4% at $5.57 in pre-market trading and the stock has traded more than 3 million shares with an hour until the open.  The prior 52-week low was $5.60.

JON C. OGG