Aided by strong sales of its AMD-K6-2 processors, Advanced Micro Devices (AMD) this week surprised Wall Street by reporting a return to profitability, posting a third-quarter net income of slightly more than $US1 million, or one cent per share.
In the third quarter of 1997 AMD reported a net loss of $US31.6 million on sales of $US597 million or a net loss per share of 22 cents.
Analysts polled by First Call had expected the chipmaker to report a loss of 11 cents per share for the third quarter, which ended Sept. 27.
Sales in the third quarter of 1998 totaled a record $US686 million, which was an increase of 30 per cent from the immediate-prior quarter, and an increase of 15 per cent from the same period in 1997, the company said.
AMD's shares closed today at $US19.88 on the New York Stock Exchange, up $US1.50 from yesterday's closing price of $US18.38.
AMD expects to be in the black again next quarter, helped along by the holiday season and by stronger sales of its faster microprocessors, Jerry Sanders, AMD's president and CEO, said in a teleconference this week. Around three-quarters of the microprocessors AMD sold in the third quarter were faster than 300MHz, and more than half of those sold in the fourth quarter will be 350MHz or faster, Sanders said.
The company also expects growth from the notebook PC market, thanks largely to the price advantage its 300MHz mobile K-6 offers over rival Intel's comparable offerings, Sanders said. Due to company policy, AMD sells its microprocessors at a price 25 per cent less than that of comparable offerings from Intel, and that includes mobile as well as desktop chips, Sanders said.
AMD's share of the US retail notebook market increased from four per cent in June this year to 14 per cent in August on the strength of that price advantage, he said.
Most of AMD's gains in the desktop space have been made in the consumer area, where cost conscious shoppers have been won over by the company's aggressive pricing. That growth pattern will start to change next year, Sanders predicted.
"We believe we'll see major penetration into the commercial space in 1999, led by next generation K6, Sharptooth," Sanders said.
Expected to debut early next year, Sharptooth is a version of AMD's K62 with 3D!Now technology that packs an additional 256KB of on-chip cache memory.
AMD expects to announce the addition of another top-tier PC manufacturer to its roster of K6-2 customers this quarter, Sanders said, although he would not say which company it will be. Current top-tier AMD customers include IBM, Hewlett-Packard, Compaq Computer and Acer.
Despite the return to profitability in the third quarter, for the first nine months of 1998, AMD is still reporting a net loss of $US126 million or 88 cents per share, on sales of $US1.7 billion. For the first nine months of last fiscal year AMD posted a net loss of $US8.75 million or 6 cents a share, on sales of $US1.74 billion.
Shipments of AMD-K6 family processors increased by more than one million units to 3.8 million units, and AMD-K6 family processor sales increased by 70 per cent over the immediate-prior quarter, the company said in a statement.
Total third-quarter company bookings for the AMD-K6 family of processors reached record levels, the company said.