AMD joins profit warning fray

Chip maker AMD has issued its own fourth-quarter profit warning only days after Intel made waves with its glum forecast for the quarter ahead.

          Advanced Micro Devices and Intel are already bitter rivals in the microprocessor market, often competing for the same customers. So, not surprisingly, AMD Monday issued its own fourth-quarter profit warning only days after Intel made waves with its glum forecast for the quarter ahead.

          AMD joined a long list of PC-related vendors suffering from weak year-end demand. The Sunnyvale, California-based chip company looks for fourth-quarter net income to stand at around 50 to 60 cents per share, AMD said in a statement. These numbers fall well below the predictions of analysts polled by First Call/Thomson Financial who forecast earnings per share of 68 cents for the period.

          The chip vendor expects fourth-quarter sales to be flat or "nominally higher" than those recorded in the third quarter of $US1.2 billion. AMD is due to report its fourth-quarter and year-end results on Jan. 16, 2000.

          Like Gateway, Apple Computer and Intel, AMD pointed to slow sales of PCs in US retail markets and dragging processor sales as indicators that the coming quarter will not finish as hoped. Consequently, AMD expects fourth-quarter unit shipments of its PC processors will be only very slightly higher than the 6.8 million shipped in the third quarter. The chip vendor had been expecting to ship between 8 million and 9 million units of its PC processors in the fourth quarter.

          While the wireless world seems to threaten the PC's dominance, chip makers AMD and Intel are looking for the PC to act as the central machine connecting various wireless devices together. The two companies also claim their respective flash memory products still show strong growth and could be a bright spot in the coming quarters. Additionally, despite the slowdown in PC sales, demand for chips to run in high-end computers also remains high, according to both AMD and Intel.

          Demand for 1GHz and faster Athlon chips is still strong, AMD said. The company is still on track to sell out its production of Athlon processors. Demand for its lower end Duron chip should pick up in the first quarter of fiscal 2001 when chipsets with integrated graphics appear, the company added.

          Intel said last week that its fourth-quarter revenue totals would be spoiled by lack of demand for its products. The company would not say whether earnings-per-share forecasts would be met but confirmed sales softened in recent weeks. Like AMD, Intel hopes and believes strong PC sales will return.

          Analysts tend to agree with the chip makers' assessment. Many industry pundits expect markets will open in regions with less current PC saturation than North America. In addition, some analysts see the increasing adoption of Microsoft Corp.'s Windows 2000 operating system as another driver that may boost PC sales over the coming year.

          AMD released its warning after the markets closed. Shares of AMD rose nearly 8 percent to a Monday close of $17.31. In the after-hours markets, AMD continued to hold its ground, holding tight to the almost 8% gain.

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