Advanced Micro Devices has reported earnings sharply below analysts' estimates, blaming the numbers on weak flash memory and programmable logic device revenues and high costs from its K6 launch.
For the second quarter ended June 29, AMD posted sales of US$594.6 million, a 31 percent increase over the same period last year and an eight percent increase over this year's first quarter, officials said. More than $100 million in sales of the K6, AMD's MMX-enhanced, Windows-compatible processor, helped boost revenues, officials said.
Net income during the quarter was roughly $10 million, or 7 cents per share, officials said.
While that's an improvement over the same period last year the results fell sharply below analysts' 22 cents per share expectations, according to First Call Corp., a Boston-based investment research firm that compiled estimates from 23 brokers. In the same period last year AMD posted a loss of $34.7 million, or 26 cents per share,
The second quarter earnings also slumped compared to the first quarter this year, when AMD posted net income of roughly $13.0 million, or 9 cents per share.
Despite the strong K6 sales, AMD expected earnings to lag somewhat, given costs associated with ramping up K6 production, marketing, and advertising, said Scott Allen, AMD spokesman.
AMD's weaker performance in flash memories and in its Vantis programmable logic business unit came as more of a surprise, however, Allen said. Flash memory unit sales actually rose, but competitive price cuts led to a drop in revenues, he said.
The company also expected slower sales from its non MMX-enhanced K5 chip.
In the first six months of this year, AMD posted revenues of $1.1 billion and net income of $22.9 million. During the first two quarters last year, AMD's revenues were $999.3 million and its net loss was $9.3 million, or 7 cents per share.
For the third quarter, AMD expects to see a sharp increase in K6 sales, up from 350,000 in the second quarter to 1 to 2 million units, Allen said. It is expecting only nominal growth in its non-microprocessor business units, however, since the third quarter is traditionally a slow one for those products.
AMD, in Sunnyvale, California, can be reached on the World Wide Web at http://www.amd.com/.