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

To: Jim McMannis who wrote (52066)	3/9/1999 10:52:00 AM
From: d e conway	Read Replies (1) \| Respond to of 1571438

GRIM... 3/09/99 - Chip Maker Advanced Micro Devices Warns of "Significant Loss" in Quarter Mar. 9 (San Jose Mercury News/KRTBN)--Computer chip maker Advanced Micro Devices Inc. said Monday that it expects to report a "significant loss" in the first quarter as production problems and a price-cutting war with rival Intel Corp. left it stumbling through the first two months of the year. "Intel is a fierce competitor," said AMD spokesman Scott Allen. "But our fate to a larger extent is in our own hands. We need to execute." Analysts seemed to agree, saying that manufacturing glitches hamstrung AMD just as it was poised to profit from its popular K6 microprocessor, the brains which power many personal computers costing less than $1,000. The Sunnyvale company will ship no more than 5 million of the K6 microprocessors in this quarter, which ends March 28 -- a half-million less than what it had projected earlier. "AMD shot themselves in the foot," said Hans Mosesmann, senior analyst at Prudential Securities. "They tried so hard to catch up in the fourth quarter. Then they messed up their recipe for making chips." AMD also said it would cut 300 jobs over the next two quarters, which will result in a charge against earnings. The workforce reduction -- which amounts to 2.2 percent of its 13,800 employees -- will come through attrition, not layoffs, Allen said. The company would not disclose which jobs were being eliminated. The jobs cuts are not related to the expected losses, he said, but are intended to refocus the company"s efforts on the microprocessor market, where AMD has been locked in a tough battle with industry giant Intel. AMD seemed to be making gains recently, selling more chips than Intel in the U.S. retail market for personal computers in January, according to research company PC Data. That data did not account for direct sales to consumers or sales to corporations, both of which favor Intel. Nevertheless, it reportedly was the first time that Intel had not topped the list. Then AMD tweaked its manufacturing process in an effort to increase the yield of its faster K6 microprocessors -- those that operate at speeds of 400 megahertz. Instead, a majority of the chips fabricated were 300 megahertz chips, even slower than the majority 350 megahertz chips manufactured by the earlier design process, Allen said. The faster chips are more desirable and much more profitable. Those problems have now been straightened out, he said, but during the first two months of this year AMD was still shipping slower K6 chips from its snarled production. "In a lot of ways the last couple of quarters were the most benign environment AMD has had in a long time," said Mosesmann. "The extra demand could have gone to AMD. Instead Intel scooped it up." And in the fast-moving world of PC chips, where last quarter"s cutting-edge technology is today"s fading standard, Intel squeezed AMD earlier this year by rapidly cutting the prices on its Celeron chip, its competitor to AMD"s K6. Allen said those price cuts came three weeks to one month sooner than AMD had expected. AMD still expects to ship its original target of 20 million to 25 million units by the end of the year, Allen said. And its next-generation K7 chip remains on schedule for release in June. After AMD"s first warning last month about earnings, analysts estimated that the company might report losses of nine cents per share, according to a poll by First Call Corp. Allen said that losses this quarter will be more than that: "No question." Even before Monday"s news, analysts had been less than enthusiastic about AMD stock. "Nobody"s pounding the table about this stock," said Chuck Hill, analyst at First Call Corp. AMD stock rose 50 cents to close at $18.94. Its statements came after the close of market. Separately, AMD said it had reached an agreement with the Teachers Insurance and Annuity Association College Retirement Equities Fund to add more independent directors to its board. As a result, TIAA-CREF said it would withdraw its resolution requiring that a majority of AMD directors have no affiliation with the company. By Miranda Ewell -0- Visit Mercury Center, the World Wide Web site of the San Jose Mercury News, at sjmercury.com (c) 1999, San Jose (Calif.) Mercury News. Distributed by Knight Ridder/Tribune Business News. AMD, INTC, END!A$3?SJ-MICRO