AMD Tries To Put 2002 To Rest
forbes.com
Arik Hesseldahl, 01.16.03, 1:36 PM ET
NEW YORK - When chipmaker Advanced Micro Devices announces its fourth-quarter results at the close of market today, the dour state of its earnings will come as little surprise.
AMD (nyse: AMD - news - people ) is badly bruised after a two-year slump in the semiconductor market, during which its fight with rival Intel (nasdaq: INTC - news - people ) over their share of the PC microprocessor market has turned in Intel's favor.
Analysts polled by First Call/Thomson Financial expect AMD to report a loss of 42 cents per share, though some say it could it be as much as a 59-cent loss.
So cry if you will over last year, then focus on the future. The first of the two glimmers of hope for AMD this year is its so-called Hammer chip line--a desktop PC chip called Athlon 64 and a server chip called Opteron. AMD executives will have to reassure investors and analysts alike that the chips are still on track. If there's even the suggestion in the conference call that they are off schedule, what investors remain will find it hard not to head for the exits.
Nathan Brookwood isn't worried. "My expectation is that both products will be launched in the March-April time frame," says the analyst at Insight64 in Saratoga, Calif. "While AMD will probably place more emphasis on the server chip, both should be available in the second quarter."
If typical AMD patterns hold, the company will launch Athlon 64 with its usual cadre of PC manufacturers, including Hewlett-Packard (nyse: HPQ - news - people ). Still unknown, however, is the status of potential customers for Opteron, which is intended to compete with Intel's Itanium 2 server chips.
According to Brookwood, a few small systems integrators have committed to Opteron. But nothing has happened with servers from Dell Computer (nasdaq: DELL - news - people ) and Sun Microsystems (nasdaq: SUNW - news - people ), despite months of speculation, while other potential customers have thrown their lot in with Intel.
"It would not surprise me if eventually we find a relationship between AMD and Sun, but that will depend on how well Sun does in the Linux server business," Brookwood says.
The other good news should be flash-memory-chip shipments, which have also been strong for Intel. Analyst Christopher Danely of J.P. Morgan Chase forecast, in a research note issued this morning, that AMD revenue would decline only 1% in the current quarter mainly because the flash business, which accounted for 37% of sales in 2002's third quarter, looks strong.
But AMD's plans for manufacturing technology look cloudy. Its relationship with Taiwanese chip foundry United Microelectronics (nyse: UMC - news - people ) seems to have cooled. The latest clue came when the government of Singapore said that plans between the two to build a jointly owned chip factory in that country don't appear to be moving forward.
That news followed the announcement of an agreement between AMD and IBM (nyse: IBM - news - people ) to develop chip manufacturing on 65-nanometer technology that will begin to appear in both companies' factories in late 2005. AMD had previously announced a similar deal with UMC to develop 65-nanometer technology.
"AMD wasn't getting what it wanted out of UMC, and so decided to go its own way," Brookwood said.
Such a joint research agreement could lead AMD and IBM to share chip-making capacity in the coming years. IBM just opened a high-end factory in East Fishkill, N.Y.; AMD could lease some of the capacity there should it need it down the road. Otherwise, most of AMD's chip manufacturing will take place in Dresden, Germany. |
