AMD Reports a Profit; Sales Increase 30%
Chip maker Advanced Micro Devices Inc. on Thursday posted its fourth consecutive quarterly profit, but the news was tempered by weaker-than-expected sales of chips for cellphones.
AMD earned $43.8 million, or 12 cents a share, in its third quarter, up from a loss of $31.2 million, or 9 cents, in the same period last year. Revenue in the three months ended Sept. 26 rose 30% to $1.24 billion from $954 million the previous year.
The company predicted in July that third-quarter sales would rise “moderately” compared with the second quarter. Instead, they fell about 2%.
The company also fell short of Wall Street’s expectations. Analysts surveyed by Thomson First Call had expected sales in the quarter to rise to $1.3 billion, on average.
Sales were particularly weak for flash memory chips, which are used to retain data in cellphones, personal digital assistants and other gadgets. The Sunnyvale, Calif., company said revenue in its memory products sector, which is almost entirely made up of flash memory chips, was up 27% compared with last year but was down 20% from the second quarter.
Chief Executive Hector Ruiz said overbuying by phone manufacturers, especially in China, was to blame.
“We believe in the second quarter there was an accumulation of inventory that was unreasonable,” Ruiz said during a conference call with analysts. AMD’s earnings statement predicted that sales of memory products would be “flat to up” for the current quarter, and Ruiz said there was “some recovery already.”
The softness in the memory sector was counterbalanced by a 34% boost in sales year-over-year of processors for personal computers and servers. AMD forecast its computer processor sales would rise in the current quarter but did not say by how much.
That is an indication that AMD could be gaining on the dominant processor business of archrival Intel Corp., said Michael Cohen, an analyst at Pacific American Securities in San Diego.
“Historically, AMD has subsidized their assault on Intel’s processors with profits from the flash memory business,” said Cohen, who personally owns AMD stock. “Now we see it finally paying off.”
AMD shares, which rose 14 cents Thursday to $14.11 on the New York Stock Exchange, rose an additional 2 cents in extended trading after the results were announced.
The company gave no other guidance for the fourth quarter. But a report released Wednesday by research group Gartner Inc. predicted that global spending by manufacturers on equipment to make chips would rise by more than 66% this year. The rate of growth would fall about 1% in 2005 and by 23% in 2006.
“In the processor market there are only two real players -- AMD and Intel,” said stock analyst Tai Nguyen of Susquehanna Financial Group in Philadelphia. “So if there is a downturn, it will have an impact on both.”
