AMD: Earnings Preview

The following commentary comes from an independent investor or market observer as part of TheStreet's guest contributor program, which is separate from the company's news coverage.

NEW YORK (Trefis) -- AMD(AMD) will be releasing its fourth-quarter and full year 2011 results on Tuesday.

Like its rival Intel(INTC), which released its earnings earlier this week, there are certain broad market factors that are likely to impact its quarterly results. Below we take a look at what investors can expect from AMD's earnings. AMD also competes with graphic chip designer Nvidia(NVDA).

Our price estimate for AMD stands at $8.50 , implying a premium of about 40% to the market price.

See our complete analysis for AMD here.

Unlike the third quarter, the fourth quarter of 2011 saw a global decline in PC sales by about 1.4% compared to the year-ago quarter. Even the healthy growth in PC shipments in emerging markets could not compensate for the decline observed in the developed markets such as the U.S. and Europe. One could argue that AMD's lower pricing could potentially moderate this impact since the company might be able to sell its microprocessors even in a weaker environment.

Although the hard disk shortage that resulted from flooding in Thailand last October is likely to have a modest impact on AMD's fourth-quarter results, that and AMD's own supply issues could make the impact more notable.

Nevertheless this factor may still remain on a moderate side compared to what we can potentially see in next two quarters. The supply shortage could especially be a disadvantage for AMD as OEMs (original equipment manufacturers) will likely give priority to higher-priced Intel PCs in situation of shortage.

Last quarter AMD announced workforce cuts that implied laying off about 10% of the company's workforce. According to the company, approximately $128 million in overhead will be cut by the end of this year. An additional $90 million in savings will come from what AMD management refers to as "operational efficiencies." A portion of these savings could be visible in upcoming earnings results.

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