Westi - thanks for the article
which I posted below this. It is about what was said on Thursday and shows how pathetic AMD's quarter will be....
here is the copy of the story
* * * * * *
July 6, 2001
AMD Says Revenue, Earnings To Fall Short of Expectations
By Khanh T.L. Tran
Staff Reporter of The Wall Street Journal
Advanced Micro Devices Inc. projected that second quarter earnings could be less than a fifth of analysts' expectations, due to intense pricing pressure from archrival Intel Corp. and slumping demand for flash memory chips.
AMD's shares fell 16% in after hours trading on the huge miss.
The Sunnyvale, Calif., semiconductor company said it expects earnings to range between three cents and five cents a diluted share, compared with an analysts' consensus of 27 cents, according to Thomson Financial/First Call.
AMD said it expects sales to decline 17% to $985 million from $1.19 billion in the first quarter, more than its earlier projection of a 10% decline and worse than analysts' sales expectations of $1.08 billion.
The gloomy forecast, released Thursday after the markets closed, contrasted sharply with comments by the company in May and June that the personal computer market seemed to be stabilizing.
But the notion that AMD wouldn't hit Wall Street's numbers didn't come as a complete surprise.
AMD and other companies have been hurt by slowing sales of flash memory chips, which are used to store data in products such as cellular telephones, digital cameras and portable computers. Mark Edelstone, an analyst at Morgan Stanley, estimates that sales of the flash chips fell about 40% in the first two months of the second quarter from the first two months of the first quarter. Considering that flash products represent about a third of AMD's business, "it's too large a part of their business for them not to be adversely impacted," he said.
In microprocessor chips, which provide the basic computing functions of PCs, Intel has moved aggressively to counter AMD's inroads. Intel launched a price war in late April by announcing a new version of its Pentium 4 chip for about $350 about half the price it usually has charged when introducing high end products.
"Intel has really lowered the boom on pricing as they're trying to move the market to Pentium 4," Mr. Edelstone said.
Dean McCarron, an analyst at the research firm Mercury Research in Scottsdale, Ariz., noted that high end processors previously had cost $700 to $800 when Intel's cut first was announced. "Intel basically lowered the ceiling," he said.
The AMD warning also caused shares of Intel to fall in after hours trading. At 4 p.m. Thursday in Nasdaq Stock Market trading, AMD shares were down $1.12 at $28.64. After trading was briefly halted, AMD shares dropped to $24 in after hours trading. Shares of Intel, Santa Clara, Calif., were at $29.84, off 62 cents, at 4 p.m. on the Nasdaq. In after hours trading, Intel fell to $28.64.
Relief may not come quickly. Earlier this week, the Semiconductor Industry Association, a trade group based in San Jose, Calif., reported that world wide sales of chips fell 20% to $12.71 billion in May from a year earlier, as the industry continued to reduce excess inventories.
The trade group said it expects the inventory correction to continue through the third quarter, but it forecast a broad based recovery beginning in the fourth quarter.
Ashok Kumar, an analyst at U.S. Bancorp Piper Jaffray, said the worst phase of the order cancellations is behind companies such as AMD.
Yet, he said, "in the short term, the environment is fairly malignant." He said he expects sales to improve marginally in the second half and that the macroeconomic environment will become better in 2002 for AMD, Intel and other technology companies. "That will provide a catalyst for better demand and pricing," he said.
Since the mid 1980s, AMD has positioned itself as a low price alternative to Intel. Until recently, however, AMD's chips often were relegated to relatively low end desktop computers.
A chip family called Athlon, introduced in 1999, helped make AMD competitive with Intel's flagship Pentium 4 chip, winning sales for higher end desktop PCs and some server systems. During the first quarter, AMD's market share swelled to 20.8% from 16.8% for the same period the prior year, according to Mercury Research; Intel's share dropped to 77.5% from 82.3% in that time.
As it moved into more upscale segments of the computer business, AMD's average price per chip actually rose slightly from that same period, to $89 from $87, Mercury Research estimates. Intel's average declined to $176 from $192.
AMD and Intel also compete in the flash memory market, a business that has been hurt by factors such as slowing sales of hand held computers and cellphones. Thursday night, Hitachi Ltd. said it has suspended production at a new plant designed to make chips for the European cellphone market and will bring the plant online "when the market improves." In a similar move, Toshiba Corp. is reducing production at four chip factories.
A spokesman for AMD said the company will refrain from commenting on its outlook for the full year until the release of second quarter results on July 12. "Clearly, business declined more than expected," he said.
Asked whether AMD will lay off employees in an effort to curb costs, he said: "Our hope is that we can get through this difficult economic situation without forced work reduction." He said that in addition to curtailing new hires and curbing expenses such as travel costs, AMD already has required employees to use 80 hours of vacation time by the end of the third quarter.
-- Don Clark contributed to this article. |
