AMD's situation reflects the huge pressure to upgrade to .25:
Advanced Micro Down 11%; Analysts Say Tax Benefit Helped 4Q
Dow Jones Newswires -- January 14, 1998
By Gaston F. Ceron
NEW YORK (Dow Jones)--Shares of Advanced Micro Devices Inc. (AMD) were
down 10.8% Wednesday, and analysts blamed the drop partially on tax benefits that may have understated the company's fourth-quarter losses.
As reported, the Sunnyvale, Calif., chip maker posted a loss of $12.3 million, or 9 cents a share, for the fourth quarter, compared with a loss of $21.2 million, or 15 cents a share, during the year-ago period. Sales climbed to $613.2 million from $496.9 million in fourth-quarter 1996.
A survey of 20 analysts polled by First Call Corp. had estimated Advanced Micro would post a loss of 14 cents a share for the latest quarter.
But the company's losses would have been wider had it not been for higher-than-expected tax benefits, said Scott Randall, an analyst at SoundView Financial Group. Without these benefits, the company might have posted a loss of 17 cents a share, Randall said.
"That's what the stock is reflecting ... that the quarter really wasn't better than expected," the analyst said.
Another analyst who follows the company agreed with Randall's analysis, saying the benefit was greater than what most analysts had anticipated.
Other issues putting pressure on the stock include concerns over the company's ramp-up of 0.25-micron chip production at its Fab 25 facility in Austin, Texas. While the strategy may prove to be what's needed in the fight with Intel Corp. (INTC) for the computer microprocessor market, analysts are worried over the near-term implications for Advanced Micro's earnings.
"The real issue is (Advanced Micro's) guidance for the first quarter, the likely production disruptions resulting from its efforts to ramp up production," said Brown Brothers Harriman & Co. analyst William Milton. "When you're trying to force a process in an accelerated fashion, many things can go on."
But despite near-term issues, Milton indicated Advanced Micro's strategy will help position the company against Intel in the longer term. Converting to 0.25-micron production will eventually help production yields, Milton said.
"The company really has no choice if it wants to compete with Intel," he said.
NYSE-listed Advanced Micro recently was down 2 1/4 to 18 5/8 on volume of 2 million, compared with average daily volume of 1.8 million. The shares closed Tuesday at 19 1/8, up 1 3/8, but rose after-hours following the release of the fourth-quarter results.
An Advanced Micro Devices spokesman said the company's ramp-up of 0.25-micron chip production is "the most important thing we are doing at this point."
The spokesman acknowledged the process may face problems at times, but added that "it's our job to solve those problems."
As far as the tax benefit that some analysts claim understated the company's fourth-quarter loss, the spokesman said only, "the tax benefit was available and we employed it."
-Gaston F. Ceron; 201-938-5174 |
