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Politics : Formerly About Advanced Micro Devices -- Ignore unavailable to you. Want to Upgrade?

To: fyo who wrote (63078)	6/24/1999 12:48:00 AM
From: RDM	Read Replies (2) \| Respond to of 1572946

Marcy writes Another Quarter, Another Sour Forecast From AMD By Marcy Burstiner Staff Reporter 6/23/99 8:42 PM ET SAN FRANCISCO -- When will Advanced Micro Devices (AMD:NYSE) CEO W.J. "Jerry" Sanders stop making predictions? One week before the company is set to launch its super fast K7 processor, it called an unscheduled conference of analysts Wednesday afternoon to warn them that its third-quarter results would be lousy. That was just in case there was an investor out there actually expecting gushing profits. And of course, what Sanders now says bears little similarity to what he predicted just 40 days ago. Now Sanders says the company will lose $200 million on revenue of less than $600 million this quarter. That's a 5% dip in revenue from the first quarter, which was a 20% plunge from the fourth quarter of last year. On April 14, Sanders had said the company would need to see $850 million in revenue in the second quarter to break even. Offsetting the $200 million loss will be a $275 million after-tax gain from the sale of its Vantis division. The company expects to produce just 3.7 million units in the second quarter, and that compares to the "paltry" 4.3 million units produced in the "horrific" first quarter and it is 26% below the goal of 5 million units. What did he say on April 14? That he fully expected the company to meet that 5-million-unit goal in the second quarter. Stay seated. Average sales prices are now at $60. That's a 23% drop from the $78 per chip the company got in the first quarter and which Sanders had said it could hold in the second quarter. And it's a whopping 40% below the target of $100. Want more perspective? Intel rakes in an average sale price that tops $200 per chip. In the past 40 days, Intel (INTC:Nasdaq) has been killing AMD. Sanders said the company has lost out completely on some second- and third-tier customers because Intel was offering chip packages -- the microprocessor, motherboard and chipset -- at prices so low, AMD chose for the first time ever, to drop a customer rather than beat Intel's price. "Intel priced below us and on packaged deals significantly priced below us," Sanders said. He speculated that Intel may have been clearing out old inventory. But Sanders is ever hopeful. The company will launch its K7 processor, now named the Athlon, next week and expects to ship out tens of thousands this quarter and hundreds of thousands next quarter. Systems will be available in the market beginning August. They will start at initial speeds of 500, 550 and 600 MHz, which will match the top speed Intel expects to have on its Pentium III this summer. The Athlon will hit 650 MHz on .25 micron by the third quarter and 700 MHz on .18 micron by the fourth quarter, he said. And that will make it more than 15% faster than Intel's top chip offering. And to get these speeds, said AMD COO Atiq Raza, the Athlon will not need revolutionary, costly and controversial Rambus (RMBS:Nasdaq)-based memory, although the chips will be Rambus-compatible. The Athlon will dramatically lift ASPs, Sanders said, although he wouldn't offer any specific numbers. "I wouldn't expect to see a K7 in a sub-$1000 machine this year," he said. AMD does not expect to see the Athlon competing against the K6, in the same way that Intel's low-priced Celeron chip competes against its higher-priced Pentium III line. Nathan Brookwood, semiconductor technology analyst at research firm Insight 64 said the samples of the K7 that are being independently tested are passing all tests. "Right now all of the benchmarks where AMD used to lose to Intel, AMD with the K7 will win," he says. "I don't know of any benchmarks where that is not the case." And even as Intel pushes AMD on prices, AMD has been fighting back even without the K7. Last week it penetrated Gateway's (GTW:NYSE) business computer line, when the retailer began offering a $2,299 Profile business computer powered by a 400 MHz K6-2. If the Athlon can be manufactured, Brookwood believes AMD will meet its long-sought goal of penetrating the last hold out, Dell (DELL:Nasdaq), because Dell will have to offer computers with the fastest chip on the market. "Right now AMD has an H-bomb and Intel only has an atomic bomb," he said. "It will be an interesting battle."