Jerry conceded "significant uncertainty" in demand for K7
AMD Loss Is Less Than Expected, but
It's Still a Loss
By Michael Brick
Staff Reporter of TheStreet.com
10/6/99 8:51 PM ET
Advanced Micro Devices (AMD:NYSE) reported a huge
third-quarter loss late Wednesday afternoon, but it was
nowhere near as bad as Wall Street's dire predictions.
The computer chipmaker said it exceeded analysts'
expectations as a result of revved-up sales of flash
memory cards and its new line of Athlon processors. The
company has staked its future on the high-speed
processors, which it is using to mount a head-on assault
against rival Intel (INTC:Nasdaq).
"We met our goal, albeit barely" for Athlon shipments,
said Jerry Sanders, AMD chairman and CEO, speaking to
analysts and reporters in a conference call. Sanders
predicted the company would ship 1 million or more
Athlon chips by the end of the year, but he conceded that
there is "significant uncertainty" in demand for the
product.
For the quarter ended Sept. 26, AMD posted a net loss of
$105.5 million, or 72 cents a diluted share, compared with
net income of $1 million, or 1 cent a share, in the 1998
third quarter. Before the announcement, 18 analysts
surveyed by First Call/Thomson Financial were
expecting an average loss of 97 cents a share. Sales fell
3.5% from a year earlier, to $662.2 million.
But beating an expected gigantic loss with merely a large
loss is still a dubious accomplishment, one analyst
argued.
"Who cares?" said Drew Peck, an analyst for SG Cowen
who has a hold rating on AMD. (SG Cowen has not done
underwriting for AMD.) "When a company is losing this
much money, it's a little specious to split hairs and try to
figure out whether they're meeting or beating the Street's
expectations."
AMD continued to have problems delivering its new
products in the latest quarter. "Limited AMD Athlon
motherboard availability during the third quarter was
exacerbated by the Taiwan earthquake ," the company
said in a news release. The aftermath of the earthquake
on Sept. 21 will continue to limit Athlon sales in the next
quarter, AMD said.
The company also announced it would jettison part of its
communications business.
Wall Street had become increasingly pessimistic about
AMD's prospects as the quarter wore on. The loss
projected by analysts polled by Zacks Investment
Research widened to 98 cents a share from 60 cents in
July.
But that was calculated, Peck argued. "The company
strategy is to lead investors to expect the worst and
capitalize on the surprise," he said.
The Street apparently sensed that AMD's financial results
would not be so bad. The company's stock climbed
13/16, closing at 19 7/16 Wednesday ahead of the
announcement. The company's stock did not trade after
the markets closed, according to Instinet.
During the quarter, analysts' estimates seemed to get
worse even around ostensibly good news. By the time the
company announced that new 550- to 650-megahertz
Athlon processors were available on Aug. 9, analysts
were expecting a loss of 86 cents a share.
The stock's price fell, too, to below 18 last week from a
monthly high of 24 3/4 on Sept. 8.
But investors this month may have been paying close
attention to indicators for the next quarter, like the Taiwan
earthquake, which was expected to hurt production. That
quake came a day after The Wall Street Journal reported
in its online edition that that Gateway (GTW:NYSE)
would stop buying AMD chips. |
