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Technology Stocks : How high will Microsoft fly? -- Ignore unavailable to you. Want to Upgrade?

To: johnd who wrote (42918)	4/21/2000 9:21:00 PM
From: johnd	Read Replies (1) \| Respond to of 74651

AMD chips sell out Athlon and K6-2 processor lines sell briskly in normally slow quarter By Staff Writer David Kleinbard April 21, 2000: 3:04 p.m. ET "The demand is extremely high across the board," NEW YORK (CNNfn) - Advanced Micro Devices, the number two maker of microprocessors used in PCs, said on Friday that it has sold out of both its microprocessor lines for the current quarter, a sign of serious capacity constraints in the industry that could crimp PC makers. A spokesman for Sunnyvale, Calif.-based AMD (AMD: Research, Estimates) said that the company's high-end Athlon processors and its value-priced K6-2 chips are sold out for the second quarter, which ends in June. "There's either a shortage going on because of manufacturing constraints at Intel or incredible demand," the AMD spokesman said. The spokesman noted that it is unusual for microprocessors to sell out in the second quarter, which is normally a slow period, with demand picking up in the third and fourth quarters because of the back-to-school and Christmas seasons, as well as new PC models being introduced. In a related sign of supply constraints, semiconductor analysts said that Intel Corp (INTC: Research, Estimates). is delaying the launch of its 633- and 667-MHz Celeron chips by about two months because it doesn't have enough manufacturing capacity. Intel spokesman Chuck Mulloy declined to comment on the release date for those two chips, but said they will be released at some point in the second quarter. The Celeron is Intel's value-priced chip that normally goes into sub-$1,000 PCs and competes with AMD's K6-2. "The demand is extremely high across the board," Mulloy said. Semiconductor analyst Danny Lam of FHI Research.com said it makes sense for Intel to concentrate its limited capacity on the production of its Pentium III chips, because they have higher profit margins than the Celerons. "If you were constrained by manufacturing capacity, you would focus on selling the lower-end Pentium III, which is almost a drop-in replacement for the higher-end Celerons, but more profitable," Lam said. "I think there is going to be a demand explosion in the third and fourth quarters that surprises even Intel," Lam said. Semiconductor analysts said that the delay in launching the two Celeron chips could enable AMD to avoid lowering the prices of its K6-2 microprocessors. "If Intel had delivered these two chips on time, it would have really opened up a performance gap with AMD's K6-2," said Linley Gwennap, principal analyst of the Linley Group, who has analyzed the microprocessor industry for more than 10 years. When Intel released its earnings earlier this month, it acknowledged that it had underestimated demand and said that it will invest $6 billion this year to increase its chip production capacity. "Demand in the first quarter was stronger than we expected at the beginning of the year and continues to be stronger as we enter the second quarter," Craig Barrett, Intel's president and chief executive officer, said earlier this month. "We also expect a strong second half, and are accelerating our investments in capacity to meet future demand." AMD has benefited strongly from the industry's overall shortage of chips. The company last week reported a first-quarter profit that blew past expectations, earning $189.3 million, or $1.15 per share, nearly double the 58 cents-per-share profit analysts polled by earnings tracker First Call had expected. Sales for the quarter were $1.09 billion, which is up 73 percent from last year's first quarter.