AMD Sales Are Down, Losses Up
Advanced Micro Devices Inc. said Friday that its sales tumbled 22% and losses soared in the third quarter, and it blamed the weaker-than-expected results on a price war with Intel Corp.
The chip maker said its net loss in the quarter ended Sept. 30 could be as high as $220 million after one-time restructuring charges of $80 million to $110 million.
“In the face of very aggressive competition, average selling prices for PC processors declined sharply, which resulted in substantially lower revenues,” the company said.
It was the second time in a little more than a month that Sunnyvale, Calif.-based AMD warned investors to lower expectations for third-quarter sales.
AMD said quarterly sales will be about $766 million, down 22% from the second quarter. On Aug. 29, AMD said it expected sales to fall 15%, the deeper end of an original estimate of a 10% to 15% drop.
Falling prices and weaker sales will lead to a quarterly loss, before one-time items, of $90 million to $110 million, or 26 cents to 31 cents a share. Wall Street had expected a loss of 12 cents, according to Thomson Financial/First Call.
A charge on earnings of $80 million to $110 million stems from job cuts and the closing of two chip-making plants that the company announced last month.
Shares of AMD dropped 40 cents, or more than 4%, to $8.60 on the New York Stock Exchange. The stock traded as high as $34.60 this year. It has fallen steadily over several months along with the stocks of many other technology companies.
AMD said its volume of chip shipments remained at the record levels of last quarter, when the company sold 7.7 million microprocessors. Some analysts actually expected its unit sales to rise further in the third quarter.
But a dramatic drop in prices led to the sharp drop in sales, AMD said.
Prices for microprocessors tumbled at least 15% to 25% from the second to third quarters, said Robertson Stephens analyst Eric Rothdeutsch. The drop, he said, resulted from very aggressive competition between AMD and Intel.
Noticeably absent from AMD’s sales warning was a reference to the Sept. 11 terrorist attacks. Business hit a brick wall for many companies after the attacks, but AMD’s third-quarter results could be shielded from the kinds of problems that have hit other technology players.
“They’re at least two steps removed from end consumption,” Needham & Co. chip analyst Dan Scovel said. A precipitous drop in consumer spending in the days after the attack hurt PC makers more than their suppliers, such as chip makers, he said.
