Negative comments on Q399 CC by Cowen & Gerard Klauer
AMD Q3 loss narrower-than-expected, Athlon, flash
cited (adds analyst comments, details, byline, previous Sunnyvale)
By Therese Poletti
SAN FRANCISCO, Oct 6 (Reuters) - Computer chip maker Advanced
Micro Devices Inc. (AMD) reported a third quarter net loss that was
narrower than analysts' expectations, citing strong sales of its new
Athlon chip and flash memory chips.
AMD, which rivals industry leader Intel Corp. (INTC) in the PC
microprocessor business, reported a third quarter net loss of $105.5
million, or 72 cents a share, versus a profit of $1 million, or one cent a
share in the year ago quarter.
According to First Call, which tracks analysts' estimates, the
consensus among analysts was a loss of 97 cents a share.
In the third quarter ended Sept. 26, AMD reported revenues of $662
million, down about 3 percent from year-ago revenues of $686 million.
Sunnyvale, Calif.-based AMD said third quarter sales of its flash
memory chips grew by 28 percent over the the preceding quarter, with
demand for the chips outstripping the company's ability to supply them
even while it boosts production.
"It was better than consensus, but the thing that was driving it was
flash," said Jack Geraghty, a Gerard Klauer Mattison & Co. analyst.
The company also surprised analysts with an announcement that it
plans to sell its communications business - which has about $300
million in revenues a year, a move to generate more cash for the
money-losing chip maker.
"Obviously, this company is having big problems," said Drew Peck, an
SG Cowen & Co analyst. "It's cash flow negative. They are now at the
point where they are selling off pieces of their business to subsidize the
remaining piece. All their eggs are in one basket."
That basket is the microprocessor business, where AMD is fighting it
out with Intel, the dominant player with over 80 percent of the world PC
market.
AMD said that it shipped a total of 4.5 million units of microprocessors
in the quarter, up from 3.7 million units in the second quarter. On a
conference call with analysts, AMD executives said that its newest chip,
Athlon, made up about 200,000 units of the total.
Athlon, which was introduced in early August, is AMD's foray into
higher-end PCs. Athlon is a faster processor than Intel's fastest
Pentium III. Because of the higher prices that AMD is able to charge for
the Athlon, AMD said that its average selling price for Athlon was just
under $300 in the quarter.
In total, the total average selling prices for all AMD's microprocessors,
including its older K6 family of chips, was $65, down from $67 in the
prior quarter.
AMD said it was constrained in its sales of the Athlon processor,
because the motherboards and chip sets that accompany it are made
in Taiwan, where a major earthquake two weeks ago disrupted all
electronics manufacturing.
"We produced 350,000 Athlons but because of shortages of
motherboards, we couldn't sell all of them," W.J. (Jerry) Sanders III told
analysts on a conference call.
Sanders also told analysts that in order for the company to reach a
break-even point, he estimates it must reach $850 million in revenues in
the current fourth quarter.
"In the face of the uncertainty in the supply chain as a result of the
Taiwanese earthquake, until we have more visibility, we are unable to
give more definitive profit guidance," Sanders said.
AMD said it hired investment bankers at Donaldson, Lufkin & Jenrette
and Salomon Smith Barney to find a buyer for its communications
product group that makes integrated circuits for telecommunications
and computer networking.
AMD said it hopes to complete a sale of the unit, which produced
revenues of $70 million in the third quarter, during the first half of 2000.
The company's shares ended trading up $0.8125 to $19.4375 on the
New York Stock Exchange. The earnings announcement came after the
market's close. |
