AMD Warns, Cites Weak Chip Pricing

Jul 05 2001

Microchip maker Advanced Micro Devices on Thursday warned that pricing pressures in the PC-chip and flash memory markets would cause it to miss its previous earnings and sales estimates for the fiscal second quarter.

The Sunnyvale, California-based company said it now expects a 17-percent drop in second-quarter sales from its first-quarter results and warned profits would miss Wall Street forecasts.

AMD estimated that second-quarter net income would be 3 to 5 cents per diluted share.

Wall Street analysts had expected the company to report net earnings of 20-32 cents per share in its fiscal second quarter, with a consensus of 27 cents, after reporting 61 cents in the year-ago quarter on sales of $1.17 billion, Thomson Financial/First Call research reported.

Sales fell 17 percent from the first quarter, to $985 million, compared to the firm's previous forecast of a drop of up to 10 percent.

Analysts expected revenue of $1.02 billion in the quarter ended July 1. AMD is scheduled to report its second-quarter results on July 12.

"First, demand for flash memory devices was and continues to be weaker than anticipated," AMD said in a statement.

"Second, competitive pressures in the PC processor market depressed the company's average selling prices ... despite continuing weak PC market conditions and very aggressive pricing by Intel Corporation, the company achieved record unit sales of AMD Athlon processors."

Total unit sales of personal computer microprocessors also hit a record AMD said.

But the company said that it had sold a record number of processors for personal computers, including its star Athlon chip, which helped drive strong results in the previous quarter relative to its bigger rival, Intel Corp.

"It's more the economy than competition," since many vendors also seem to be pressured, said Roger Kay, a senior analyst at International Data Corp., which reports on and sells to technology companies.

AMD estimated that second-quarter net income would be 3 to 5 cents per diluted share.

AMD first-quarter net income dropped 34 percent, a strong performance compared to an 82 percent drop at rival Intel, which analysts had expected to respond by dropping prices on its own speedy chip, the Pentium 4.

"The company may well be taking share, but at lower unit prices and ultimately profits," Kay said.

AMD shares closed off 3.76 percent, or $1.12, at $28.64 on the New York Stock Exchange.