AMD Returns to Profit After 9 Quarters of Losses
Adding fresh evidence that a broad-based technology recovery is underway, chip maker Advanced Micro Devices Inc. said Tuesday that a 76% increase in fourth-quarter sales catapulted the company into the black for the first time in more than two years and that the profit would continue throughout 2004.
The Sunnyvale, Calif., company ended nine straight quarters of losses with a profit of $43.2 million, or 12 cents a share, in the three months ended Dec. 28. That compares with a loss of $855 million, or $2.49 a share, in the same period a year earlier. Revenue jumped to $1.2 billion from $686 million on strong sales of flash memory chips, which retain data when a device is turned off.
The results blew past Wall Street’s expectations. Analysts surveyed by Thomson First Call had estimated AMD would earn 4 cents a share on $1.08 billion in sales in the fourth quarter, which is typically the strongest for tech firms.
AMD’s report reflects “very good seasonal demand enhanced by general economic recovery,” said Shane Rau, a chip analyst for technology market researcher IDC.
Last week, AMD’s main rival, chip giant Intel Corp., raised hopes that the three-year technology slump was over when it said quarterly sales rose to an all-time high. Both Intel and IBM Corp., the world’s biggest computer maker, said their fourth-quarter profit doubled.
Taken in that context, AMD’s rosy report “speaks to a rising tide for all boats,” Rau said.
AMD Chief Financial Officer Robert J. Rivet told analysts during a conference call that the company would be profitable for the full calendar year, though he didn’t give further guidance.
Added Chief Executive Hector Ruiz: “We’ve not planned to lose money in the first quarter.”
AMD shares, which rose 62 cents to $17.38 in regular trading on the New York Stock Exchange, slid to $17.06 in after-hours trading.
Analysts attributed the dip to giddy expectations that the company would offer an even rosier outlook.
“I think it’s just, ‘Buy on rumors, sell on the news,’ ” said Tai Nguyen, a chip analyst with the brokerage Susquehanna Financial Group. “People were suspecting a lot more, and were running the stock up in the last couple of days.”
Most of AMD’s strength in the fourth quarter came from sales of flash memory chips, which are in higher demand thanks to the popularity of gadgets like cellphones and digital cameras.
“People are beating a path to AMD’s door in flash,” said James Jungjohann, a semiconductor analyst based in Denver with the investment bank CIBC World Markets. “The flash business really exceeded our expectations.”
Intel’s decision to raise prices on flash memory chips early last year angered some customers who switched to AMD, Rau said. “AMD is benefiting from Intel’s loss,” he said. Revenue from flash memory probably will be flat in the first quarter, when business traditionally slows, Rivet said. Overall sales will be down slightly from the fourth quarter, he said.
For the full year, AMD lost $274 million, or 79 cents a share, narrowing its loss from $1.3 billion, or $3.81 a share, in 2002. Revenue in 2003 was $3.5 billion, up 30% from $2.7 billion in 2002.
