AMD Cuts Forecast, Warns of Heavy Loss

By GLENDA McCARTHY

Oct. 3, 2002 12 AM PT

TIMES STAFF WRITER

Citing continued weakness in personal computer sales, Advanced Micro Devices Inc. slashed its revenue forecast Wednesday and warned of a substantial loss for the third quarter.

The maker of Athlon and Duron processors now expects sales of about $500 million for the quarter, rather than the slightly more than $600 million it forecast in July.

Analysts had been expecting AMD to report a loss of 49 cents a share on sales of $614 million for the quarter ended Sunday, according to Thomson First Call.

The Sunnyvale, Calif.-based chip maker has cut inventories of its processors, which resulted in reduced unit sales, prices and overall revenue, Chief Financial Officer Robert Rivet said.

Sales of flash memory chips used in cellular phones and other digital devices continue to improve, he said.

AMD’s announcement was hardly a surprise given the weakness in the PC sector and the slowdown in technology spending, said Douglas Lee, an analyst with Banc of America Securities, which does not own AMD shares or do business with the company.

But the warning underscores that AMD’s market position is much weaker than that of industry leader Intel Corp., Lee said.

Shares of AMD dropped 79 cents, or nearly 15%, in extended trading Wednesday. Before the announcement, the shares closed up 10 cents at $5.37 on the New York Stock Exchange.

AMD will release its third-quarter results Oct. 16.

AMD’s announcement came a day after a trade group said August chip sales showed signs of a broad-based improvement. Worldwide sales rose 14% to $11.7 billion from August 2001, the first double-digit increase since the industry’s low point in 2001, the Semiconductor Industry Assn. said.

Strong growth in sales of chips for mobile phones was a major factor, but the figure also reflected a traditional pickup in PC chip sales in anticipation of back-to-school and holiday sales.

But Lee offered a less optimistic view of the industry: “Everyone’s trying to catch the falling knife.”

Times wire services were used in compiling this report.