AMD shares sink to levels not seen in 2 years
NEW YORK, Aug 30 (Reuters) - Shares of Advanced Micro Devices Inc. <AMD.N> fell to lows not seen since 1999 on Thursday, a day after the computer chip maker warned that its revenues would sink 15 percent this quarter as a price war and sluggish demand take their toll.
In afternoon trade, shares of AMD fell 95 cents, or 6.7 percent, to $13.25 on the New York Stock Exchange, the lowest level they have traded since December of 1999.
AMD's forecast of a 15 percent sales drop was at the deeper end of an earlier forecast of a 10 percent to 15 percent drop.
Wall Street analysts promptly sliced their earnings estimates for Sunnyvale, California-based AMD, which holds about 20 percent of the market for personal computer microprocessors, putting it squarely in second place behind industry leader Intel Corp. <INTC.O>
The revenue warning comes amid a flurry of activity in the semiconductor industry. Over the weekend, both AMD and Intel dropped prices by as much as half on their lines of microprocessors, which serve as the brains of personal computers.
Then, on Monday, Intel unveiled its fastest Pentium processor, running at 2 gigahertz, widening the gap in chip speed with AMD, whose fastest chip runs at 1.4 gigahertz.
"It's clear that AMD has slipped against Intel in the speed war," said Salomon Smith Barney analyst Jonathan Joseph.
AMD has countered that its chips are more efficient than Intel's, and that head-to-head comparisons of clock speed give a misleading picture of overall speed and power.
Merrill Lynch analyst Joe Osha said AMD's biggest problem is a drop in chip prices. While back-to-school shopping could lift demand, he said, Intel seems willing to push prices even lower.
"We believe Intel is willing to continue raising the pain level as it attempts to migrate its own desktop business to 2 GHz, even if that means lower margins for Intel's own business," Osha said in a research note.
Following AMD's revenue forecast, Osha widened his loss estimate for the third quarter by a penny a share, to 7 cents.
Robertson Stephens cut its full-year earnings forecast to 32 cents a share, down from 39 cents. It also lowered its 52-week price target on AMD shares to $18, from $28.
16:15 08-30-01
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