AMD Reports Lower-Than-Expected Earnings

Advanced Micro Devices Inc. on Tuesday reported lower-than-expected second-quarter earnings due to pricing pressure from rival Intel Corp., slower sales of older products and manufacturing delays.

The Sunnyvale-based chip maker’s net income was $9.97 million, or 7 cents a share, compared with a loss of $34.7 million, or 26 cents, in the year-earlier period. Revenue rose 31% to $594.6 million from $455.1 million for the quarter ended June 29.

Earnings fell below the average estimate of 19 cents a share from Wall Street analysts.

“These guys clearly lost market share,” said analyst Ashok Kumar of Southcoast Capital Corp. “Intel’s aggressive pricing action reduced the incentive for going with non-Intel” chips.

Intel told computer makers in June that it would slash prices on its Pentium processors to boost flagging personal-computer demand and fend off competition. Those aggressive pricing moves have affected AMD, analysts said.

AMD can’t attract top-tier vendors and it can’t sway computer makers away from Intel, especially in markets outside the U.S., Kumar said.

“There’s very little brand loyalty” to AMD, he said. “As a no-name brand vendor, I can’t go in and push [the] K6 [processor]. Intel’s brand carries meaning.”

AMD said demand for its older K5 processors diminished significantly.

Still, AMD is optimistic about the PC market, which it expects to grow 18% to 25% this year, AMD spokesman Scott Allen said. The company also said it had received K6 orders from four more PC makers: Digital Equipment Corp., Acer Computer Intl., Trigem of South Korea, and Peacock.

AMD shares fell 25 cents to close at $37.75 on the New York Stock Exchange. Earnings were released after the close of U.S. trading. Intel shares rose $2.25 to close at $149.63 on Nasdaq.