AMD Posts Huge First-Quarter Loss

Advance Micro Devices Inc. (AMD) today reported a net loss of US$56 million on sales of $541 million for its first quarter, which ended March 29.

Advance Micro Devices Inc. (AMD) today reported a net loss of US$56 million on sales of $541 million for its first quarter, which ended March 29.

The loss amounted to 39 per share, about 10 cents more than the loss Wall Street had expected. Analysts polled by First Call Corp. prior to today's announcement were expecting AMD to post a loss of 29 cents a share for the quarter.

AMD's revenues in the first quarter declined by 12 percent from the previous quarter, which ended Dec. 28, 1997, and by 2 percent from the first quarter a year ago, the company said.

For the same quarter last year AMD had reported a return to profitability with $12 million net income on sales of $551.9 million.

"The first quarter of 1998 was an unusually difficult one for AMD," Jerry Sanders, AMD chairman and chief executive officer, said in a statement.

In the quarter AMD was faced with three major challenges, Sanders said. First, AMD had to address yield problems that limited production of its AMD-K6 processors produced with 0.35-micron technology. Secondly, the company continued transitioning production to 0.25-micron technology to be able to produce higher-performance AMD-K6 processors. Lastly, AMD had to cope with the effects of a semiconductor industry slowdown, according to Sanders' statement.

During the most recent quarter AMD was impacted by the rough and tumble of a worldwide semiconductor industry hurt by excess capacity in memory chips which led to severe price pressure, aggressive inventory reduction programs by customers, and weak demand in certain Asian economies -- notably Korea and Japan, AMD said.

These conditions contributed to a 9 percent aggregate decline in revenues from AMD's three non-microprocessor businesses -- the Communications Group, the Memory Group, and the programmable logic company, Vantis, the company said.

While these conditions continue, AMD said it has resolved the yield problems on the 0.35-micron process with AMD-K6 unit production "increasing nominally over the 1.5 million units shipped in the immediate-prior quarter," the company said, without providing an exact number.

AMD has also made progress toward achieving a successful transition to 0.25-micron AMD-K6 production technology at its Fab 25 in Austin, Texas. More than 10 percent of unit shipments in the first quarter were 0.25-micron devices, AMD said.

The company also said more than half of Fab 25 wafer starts are now on 0.25-micron technology and that the company remains on target to convert all of its production to the technology by the end of the second

quarter.

"Current production rates and yields have encouraged us to communicate to our present customers that we expect to produce substantially more AMD-K6 processors in a higher-performance mix this quarter," Sanders said. "Also, we are currently engaged in expanding our customer base to absorb the significant increases in output we plan for the second half of the year."

AMD reported its earnings after the markets closed. The chipmaker's stocks finished the trading day down $1.19 to close at $30.43

AMD is based in Sunnyvale, California, and can be reached at +1-408-732-2400 or on the World Wide Web at http://www.amd.com/.

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