AMD Confirms Rumors, Says It May Post Loss
Chip maker Advanced Micro Devices Inc. said Thursday that it may post an operating loss in the current quarter as its main rival, Intel Corp., gets more aggressive with price cuts at the low end of the PC market.
The news confirmed what many analysts had begun to speculate late Wednesday and early Thursday, after AMD canceled two upcoming presentations at technology investment conferences, fueling a sharp drop in its share price in two days.
Earlier Thursday, some analysts had already begun cutting 1999 earnings estimates, or warned that AMD might see an earnings shortfall due to an increasingly tough price war with Intel, the world’s largest semiconductor maker.
“The competition is big, mean and great,” said Scott Allen, a spokesman for Sunnyvale-based AMD.
AMD shares fell $2 to $18.94 before trading was halted on the New Stock Exchange pending the company’s earnings warning. Intel dropped $8.56 to close at $130.13 on Nasdaq.
AMD, which makes clone chips of Intel microprocessors, has made big inroads in market share in the last year in the lower-cost segment of the PC market, such as the fast-growing sub-$1,000 market.
Intel, which was a latecomer to the low-end market, has recently come on strong with its Celeron processor designed for PCs costing $1,200 and less. In a move to gain back market share in that segment, Intel has moved up new product launches and price cuts in the Celeron family.
“Everyone was giving Intel grief because their first [Celeron] product was so bad,” said Dan Niles, a BancBoston Robertson Stephens analyst. “But with the Mendocino versions of Celeron, those products are very good and very cost-efficient. . . . They are putting a tremendous amount of pressure on AMD.”
In a statement issued before the stock market closed, AMD said that based on a reassessment of current business conditions, it could incur an operating loss in the quarter.
AMD said that with Intel’s recent acceleration of its price cuts and the expectations for its new Pentium III products, it is reassessing its competitive response.
It also said Intel has brought forward to Feb. 8 its planned price cuts, originally expected to occur Feb. 28.
A spokesman for Santa Clara-based Intel did not immediately return calls regarding price cuts.
