Nasdbull
,,,,AMD,,,,,,,,,,,,Should be a big mover today
* Advanced Micro Devices Inc (NYSE:AMD - news) was the second chip company to
provide an unanticipated bit of good news about earnings, a possible sign of a rebound in
the chip industry. Motorola Inc reported better-than-expected earnings Monday.
Tuesday October 6, 10:54 pm Eastern Time
FOCUS - Advanced Micro
reports surprise profit
(Adds analysts' comments)
By Therese Poletti
SAN FRANCISCO, Oct 6 (Reuters) - Advanced Micro Devices Inc. (NYSE:AMD -
news), a maker of Intel-compatible microprocessors, reported an unexpected profit in its
third quarter, buoyed by strong sales of its latest version of its K6 processor.
The Sunnyvale, Calif.-based company also said it expected to report a profit in the fourth
quarter amid a strong market for personal computers.
''We see the PC market as pretty strong,'' Chairman W.J. (Jerry) Sanders III told analysts
on a conference call, adding Advanced Micro has seen strong PC demand in the United
States, Europe and Asia.
''The worst is behind us,'' Sanders said, when asked about the overall semiconductor
industry slump, which is in its third consecutive year. ''Although we don't see a general
upturn, I don't think we are in for a worse environment.''
For the third quarter, Advanced Micro reported a narrow profit of $1 million, or 1 cent a
share, on revenues of $685.9 million, compared with a loss of $31.7 million, or 22 cents a
share, on revenues of $596.6 million in the year-ago quarter.
First Call, which tracks analysts' estimates, reported that Wall Street had been expecting a
loss of 11 cents a share, although analysts said there had been whispers in recent days of
break-even earnings.
''Their profitability came in a little bit better from keeping a lid on operating expenses,'' said
Scott Nirenberski, a CS First Boston analyst. ''We were looking for break-even, some
people were looking for a loss of around 10 cents.''
Advanced Micro said shipments of its AMD-K6 family of processors jumped by more than
1 million units to 3.8 million and AMD-K6 family processor sales increased 70 percent
over the immediate-prior quarter.
AMD said sales of its K6-2, its K6 processor with a new instruction set called 3DNow!
for two- and three-dimensional computing, made up 80 percent of its processor sales.
AMD said its excellent manufacturing and sales execution enabled it to return to profits one
quarter ahead of expectations. AMD's other non-microprocessor businesses were flat, such
as flash memory, a type of memory chip frequently used in portable devices, were flat on a
sequential basis.
Sanders said on the conference call that AMD's goal of shipping 4.5 million K6 family units
in the fourth quarter was ''do-able'' and that manufacturing capacity was not an issue.
The company also said it planned to launch a faster version of the K6-2 processor -- at a
speed of 400 megahertz -- next quarter and planned to ship ''hundreds of thousands'' of
units.
Advanced Micro said PCs powered by AMD-K6 family processors captured 31 percent
of the total U.S. retail market for desktop systems in August, the latest period for which
data are available, according to PC Data.
In the rapidly growing market for systems priced below $1,000, PCs powered by
AMD-K6 chips captured a 54-percent market share -- its highest retail market share yet.
However, analysts said that AMD still faces many challenges as it competes head on with
Intel Corp. in the microprocessor market. They contended AMD's earnings could have
been better amid signs of resurging demand for PCs, especially at the low end. AMD
typically prices its chips at least 25 percent below Intel's, for comparable performance.
''The issue is they made a penny in a pretty receptive market,'' said Scott Randall, a
SoundView Financial Group analyst. ''You have inventory refill, back to school
buildup...and Intel was stumbling badly on the low-end stuff.''
Since Intel introduced in late August a better performing version of its lower-cost Celeron
chip for the sub-$1,200 PC market, analysts said AMD faces more challenges.
''They have to dance as fast as they can to keep up with Intel,'' Nirenberski said. ''So far,
so good, but that is always a risk here.''
For the first nine months of 1998, the company reported total sales of $1.7 billion and a net
loss of $126.3 million, or 88 cents per share. For the first nine months of 1997, AMD
reported total sales of $1.7 billion and a net loss of $8.7 million, or six cents per share.
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Advanced Micro Devices Inc (NYSE:AMD - news)
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