Advanced Micro Devices, Inc. (NYSE:AMD) downgraded on bleak prospects

Chip makers are not in good shape with demand for desktops and traditional computing devices slowing a sluggish trend.

Advanced Micro Devices, Inc.(NYSE:AMD) reported earnings and revenues and lagged analyst estimates, sending the shares of the company down about 16 percent.

Chief Executive Rory Read, talking to analysts after the results were announced, said that the company was facing challenging selling environment due to the global macroeconomic weakness and also a slowdown in PC sales and original equipment makers had deferred sales ahead of the expected launch of Microsoft's Windows 8 operating system.

He said that AMD had to "build a more efficient operating model,” and “we must diversify behind the traditional PC market and become a leader in fast-growing and adjacent markets where we can differentiate and create leadership.”

Read said the company had identified areas such as “cloud computing” infrastructure, video game machines, embedded chip applications, and tablets and a “new breed of entry-level notebooks” that can benefit from AMD’s energy-efficient processors.

The stock has been downgraded by analysts who have not been impressed with what Read had to say.

Bernstein Research‘s Stacy Rasgon cut the shares from Outperform to Market Perform, and FBR Capital‘s Craig Berger also did the same.

According to Rasgon, “We have no further confidence that any aspect of our prior structural thesis (margin accretion, cash flow, and balance sheet deleveraging) will play out in the foreseeable future.”

“Indeed, we now see the prospect for structurally lower margins, as well as cash burn [...] Frankly, the most common adjective that comes up when we discuss the company with clients is, simply, ‘un-investable.’ We are now believers.”

He lowered his 2013 revenue estimated to $4.87 and a loss of 41 cents a share, compared to earlier forecasts of 14 cents profit on revenues of $5.54 billion.

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