AMD Expecting $200-Million Loss in 2nd Quarter
Microprocessor maker Advanced Micro Devices Inc. said Wednesday that it will lose approximately $200 million on declining revenue of less than $600 million this quarter, as the price war with industry leader Intel Corp. continued to take its toll.
But in the nature of the silver lining around the cloud, the company also said it has begun shipments of its new Athlon processor, previously known by the code name K7--giving it the chance to leapfrog Intel for the first time in their long-running war over microprocessor speeds by offering a chip faster than anything its rival has on the market.
AMD’s anticipated loss for the second quarter follows a loss of $128 million in the previous quarter and a loss of $64.6 million in the same quarter a year earlier. The company did not offer a loss-per-share estimate, but analysts polled by First Call Corp. expect it to be 40 cents when the company formally reports its results July 14. The most recent loss excludes a $400-million profit from the recently concluded sale of AMD’s Vantis subsidiary.
“We lost some business, particularly at second- and third-tier customers where we deemed it imprudent to match [Intel’s] price,” said AMD Chief Executive W.J. Sanders III.
Sanders suggested, however, that the Athlon chip may hint at better times ahead. Computers using the chip, which will initially run at speeds of 500, 550 and 600 megahertz, will hit the market this summer at prices above $1,200. Sanders said that the processor’s speed will rise to 700 MHz in products available for the holiday buying season.
The company declined to name computer makers that will use the chip, but said the list will include a number of leading manufacturers.
“It’s likely to be the fastest processor you can put in a personal computer for several months,” said Nathan Brookwood, an analyst with Insight 64 in Saratoga, Calif. “This will tempt those [users] who need the most performance they can get.” Engineers, graphic designers and avid players of three-dimensional games are likely customers.
The move comes on the heals of a rare stumble by Intel, which announced last week that shipments of a higher-speed version of its flagship Pentium III processor will be delayed until November, instead of September as had been expected, giving AMD a rare opening to win customers of higher-price machines.
“Clearly we need the higher [selling prices] of the Athlon processor family to regain profitability,” Sanders said. “We’re not about to wage a price war that we can’t win.”
The fastest Athlon chip will initially sell for $699 in lots of 1000--a far cry from the company’s average selling price of about $60 today. Intel’s fastest Pentium III chip for desktop computers currently sells for $744.
Some analysts suggested that AMD’s very survival depends on a successful launch of the Athlon.
“AMD has had a long-term history of a short-term problems” that have prevented the company from producing high volumes of its most lucrative products, said Michael Feibus, an analyst with Mercury Research in Scottsdale, Ariz. Without a successful launch of the K7, he added, it’s conceivable that they wouldn’t be in business next year.”
Shares in Sunnyvale, Calif.-based AMD lost $1.06 to close at $18.19 on the New York Stock Exchange.
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AMD’s Wild Ride
Shares of Advanced Micro Devices have been among the most volatile technology stocks in the 1990s as the company has struggled in Intel shadow. Quarterly closes and latest on the NYSE:
Wednesday: $18.19, down $1.06
Source: Bloomberg News
