Advanced Micro Posts 3rd-Quarter Loss
By Duncan Martell
SAN FRANCISCO (Reuters) - Advanced Micro Devices Inc. posted its first loss in almost three years as the chipmaker suffered from a slowing economy, grim PC sales and a bitter price war with rival Intel Corp., prompting it to warn of an operating loss in the fourth quarter.
Advanced Micro Devices (AMD) (NYSE:AMD - news) said on Wednesday it had a loss of $186.9 million, or 54 cents a share, compared with net income of $408.6 million, or $1.18 a share last year. Sales fell 37 percent to $765.9 million from $1.21 billion.
Excluding charges related to job cuts and closing two plants, Sunnyvale, California-based AMD posted a loss of $97.4 million, or 28 cents a share, in line with a warning issued on Oct. 5. Analysts were expecting, after the warning, a loss of 28 cents, with a loss range of 18 cents to 30 cents, according to market data research firm Thomson Financial/First Call.
In the year-ago period, excluding a gain of $336.9 million from the sale of its voice communications unit Legerity and a charge of $22.9 million for retiring debt, AMD had a profit of $219.3 million, or 64 cents.
Shares of AMD fell 95 cents to $9.66 ahead of the report, which came after markets closed. AMD shares have fallen 30 percent this year, compared with a 21 percent decline in larger rival Intel's stock price. Shares of Intel fell 39 cents to $24.57, down 1.6 percent. In after-hours trading on Island Exchange, the stock rose to $9.81.
CONFIDENT IN CHIPS, NEW TECH
In spite of its first loss since the third quarter of 1999, AMD's outspoken Chairman and Chief Executive Jerry Sanders said he was pleased that it appeared his company lost less than one percent of market share during the third quarter to its far larger rival. And, he said, AMD is well positioned -- with new Athlon XP processors and new manufacturing technologies -- once demand resumes and people and corporations buy personal computers and servers at a renewed clip.
``We feel that when the upturn comes, we're going to kick ass,'' Sanders said on a conference call. He added that the company is seeing decent sales strength in Europe, a recovery in the United States, driven by new products, though Japan continues to suffer from slack demand.
According to Mercury Research, preliminary estimates showed AMD's share of the market for microprocessors in the third quarter slipped 0.7 percentage points to 21.5 percent from a revised 22.2 percent in the second quarter. Intel's market share rose to 77.5 percent from a revised 76.7 percent in the second quarter, Mercury Research said.
No. 1 chipmaker Intel (Nasdaq:INTC - news) has slashed prices by as much as 84 percent on its Pentium 4 chip since its November introduction, and analysts expect further cuts on Oct. 28.
Intel also felt the pain of a slowing economy and PC market. Its net income plunged 95 percent to $106 million, or 2 cents a share, from $2.51 billion, or 36 cents a year-ago, as sales fell 25 percent to $6.55 billion from $8.73 billion.
``It's pretty clear that this desire to cut off our air supply is not painless to them (Intel),'' Sanders said, in an apparent reference to a well-known e-mail in which a Microsoft executive suggested some years ago it had to ``cut off'' competitor Netscape's air supply to prevent it from continuing to dominate the then-nascent Web browser market.
AMD, like Intel, didn't sound any reassuring notes about a resumption of demand in the fourth quarter, typically the PC industry's strongest. Sanders said on the call that any recovery in the PC sector was ``most likely extended by declining consumer confidence'' brought on by recent events, including the air attacks on Sept. 11 on the World Trade Center and the Pentagon (news - web sites).
But if Intel keeps the pressure on, as is entirely likely, and the PC industry limps out of this year bruised and battered, as it most surely will, what will AMD do until then, and how long is Sanders prepared to endure fiscal losses?
``If the recovery is extended out several quarters, how much loss are they willing to consider acceptable in the meantime?'' said Needham & Co. Dan Scovel. ``The price war started by Intel is theirs to stop.''
AMD said on a conference call that it had record sales of the Athlon and Duron processors in the latest quarter, coming in at more than 7.7 million, which was consistent with the record level of the second quarter. It expects another record fourth-quarter shipment level, too, Sanders said.
FOURTH-QUARTER OPERATING LOSS LIKELY
Sales of chips in its memory group, mostly flash chip sales, declined 34 percent to $210 million from the second quarter, and reflected continuing weakness in the communications sector and bloated inventories at major customers, AMD said in a statement.
The company said that sales of flash chips in the fourth quarter will range from unchanged to growth of 10 percent over the third quarter. It also said it expects again to sell a record number of Athlon and Duron chips in the fourth quarter.
Overall, AMD said it expects total company sales to be flat to ``high single-digit percentage growth'' in the fourth quarter.
``Revenues in this range would be insufficient to offset the current level of expenses, and therefore the company currently expects to report an operating loss in the fourth quarter,'' the company said in a statement.
A survey of analysts by First Call expect the company to post a loss of 21 cents a share for the fourth quarter.
Sanders also said that the company is still on track to hit 50 percent market share in the U.S. retail laptop market, but sales of mobile processors represent only about 5 percent of the company's total sales.
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Wednesday October 17, 4:39 pm Eastern Time
Alpha posts Q2 loss. sees Q3 loss
WOBURN, Mass., Oct 17 (Reuters) - Integrated circuit maker Alpha Industries Inc. (NasdaqNM:AHAA - news) on Wednesday posted a second quarter loss of $2.6 million and said it should again be profitable in early 2002 after another quarterly loss.
The Woburn, Massachusetts-based Alpha said its quarterly loss equaled 6 cents a share, compared with a net loss of $3.9 million, or 9 cents, in the first quarter of fiscal 2002. In the year earlier quarter, net income was $10.6 million, or 24 cents a share.
Net sales were helped by better-than-expected sales of wireless handsets and totaled $33 million, or well under half the $73.2 million in the same quarter a year earlier, Alpha said in a news release.
``On balance, we expect rising handset sales to generate modest overall revenue growth in our fiscal 2002 third quarter and a more substantial increase in Q4,'' CEO David Aldrich said.
``We estimate that our bottom line will improve, with our net loss ranging from 2 cents to 4 cents per share in the December quarter and a return to profitability in the March quarter.'' |
