I didn't see this posted yet. Pretty bleak possibility.
Sales drop at AMD may last longer
austin360.com
Continuing chip drought could mean more cutbacks
By John Pletz
AMERICAN-STATESMAN STAFF
Thursday, June 20, 2002
Updated 11:51 a.m.
Advanced Micro Devices Inc.'s warning Tuesday of a dramatic slowdown in revenue raises the question about whether the chip maker is in for a much longer slump.
The company said revenue will be 25 percent below its forecast for the quarter that ends June 30 because of weaker-than-expected consumer demand, especially in Europe. AMD echoed recent warnings from Intel Corp. and Apple Computer Inc.
But there may be more to AMD's problems than weak consumer personal computer sales and a slow start to back-to-school buying, said Eric Rothdeutsch, an analyst at brokerage Robertson Stephens.
In a research note to clients on Wednesday, Rothdeutsch predicted AMD will continue losing money until the end of next year. That's a long drought for a company that's already lost money in the past three quarters.
And it likely means more spending cuts. Already the company has cut about 1,200 jobs in Austin, reducing its payroll to about 3,000 workers. In the past year, AMD has stopped making computer processors in Austin, closing two older plants. It now only makes flash-memory chips here. The company will build its next processor plant in Singapore.
The company doesn't plan immediate cutbacks, Chief Financial Officer Robert Rivet told analysts Tuesday.
"It is a little late (in the quarter) to make a significant change in cost," he said. "There is no planned action. It is too early to say (what might happen next quarter)."
Computer stocks fell across the board Wednesday, with AMD's and Apple's shares both slipping about 15 percent. A broad technology selloff sent the Nasdaq index to a low for the year as investors grew more pessimistic about the timing of a turnaround.
The Dow closed down 144.55, or 1.5 percent, to 9,561.57, wiping out more than half its 231-point gain from Monday and Tuesday. The technology-focused Nasdaq slid 46.13, or 3 percent, to 1,496.83. The last time the Nasdaq closed lower was Oct. 2.
It's clear that AMD may have to reset the bar on costs. Under a restructuring planned last fall, AMD reduced its break-even point to slightly below $900 million in revenue. But Rothdeutsch predicts demand will stay below $800 million until the end of next year.
Rothdeutsch estimates AMD will have about $1 billion in cash by the end of June after spending $250 million on debt and other capital expenditures in the second quarter.
Although AMD's sales of flash memory, used in cell phones and other electronic devices, is on the rise, the personal computer buying slump that began in late 2000 drags on.
jpletz@statesman.com; 445-3601
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