AMD falls after Q1 loss, no deal with IBM
SAN FRANCISCO, April 8 (Reuters) - Shares of Advanced Micro Devices Inc tumbled after
its first quarter loss was wider than
expected and after rumors of an investment in the chip maker by IBM Corp (IBM - news) did
not materialize.
Wall Street had a mixed reaction to AMD earnings, with some firms raising earnings
estimates and others cutting them after AMD's first quarter and its conference call late
Tuesday. AMD said it had a good chance of profits in the third quarter and that its
manufacturing problems with its K6 chip were solved.
But analysts said AMD's stock had run up so much in the past few days on rumors of an
investment by International Business Machines Corp that its shares were ripe for a fall when
no deal emerged.
''Buy the mystery, sell the history,'' said one technology stock trader.
''The stock got over hyped on the rumor,'' said Mark Edelstone, a Morgan Stanley analyst.
''But the key issue is that the company solved their yield problems and that gives them a
fighting chance to drive some profitability with their K6 product cycle.''
AMD's shares were off 2-11/16 to 27-13/16. Since last Monday, AMD's stock has been
climbing every day, jumping to a recent high of around 31, on analysts' comments that AMD
had solved its manufacturing problems and on speculation of a big equity investment by IBM.
AMD chief executive Jerry Sanders told analysts on the conference call that the only
relationship AMD has with IBM is as a foundry partner. IBM recently signed a manufacturing
pact to manufacture AMD's K6 chips.
Edelstone said he raised his 1998 earnings estimates on AMD to a profit of $0.40 a share
profit, up from break-even previously. He said his initial estimate for 1999 is $1.00 but that
1999 is a much harder call to make, because its earnings will be driven by AMD's next chip,
the K7 processor, which has some major differences from Intel Corp. |
