AMD loses money, key executive

AMD loses money, key executive

Battered by its ongoing price war with Intel, chip maker Advanced Micro Devices (AMD) on Wednesday reported a second-quarter loss before adjustments of $US162 million, or $US1.10 per share, on sales of $US595.1 million.

AMD also revealed that Atiq Raza, its president, chief technical officer and chief operating officer, will leave the company at the end of the week. Raza had been viewed as a potential heir to chairman and chief executive officer Jerry Sanders. Sanders will fill the vacant positions left by Raza until a replacement is found. Raza cited personal reasons for his departure.

"He was generally regarded as the heir-apparent of Jerry Sanders . . . this is definitely a loss," said Nathan Brookwood, principal analyst with Insight 64 in Saratoga, California.

The financial results still topped the expectations of Wall Street analysts, who predicted the company would post a loss of $US1.26 per share for the quarter, according to 17 brokers polled by First Call.

The net loss of $US162 million for the quarter, which ended June 27, compares to a deficit of $US64.6 million, or 45 cents per share, in the same quarter last year. The revenue figure is 13 per cent higher than sales in the same quarter last year, but down 6 per cent from the first quarter of 1999.

The results exclude a one-time, after-tax gain of $US259 million from the sale of Vantis, an AMD subsidiary, as well as restructuring and other special charges of $US17.5 million. Including those adjustments, AMD netted a profit for the quarter of $US79.9 million, or 53 cents per diluted share.

AMD has been waging a fierce price war with Intel, and these results are largely a reflection of that battle. Average selling prices for AMD's K6 processors dropped from $US78 in the first quarter to $US67 in the current quarter, Sanders said in a teleconference.

"In the face of Intel's intensifying aggression in the consumer sector of the PC market . . . further gains in unit market share or revenue growth are unlikely," Sanders said in a statement.

Intel reported a second-quarter profit of $US1.7 billion on revenues of $US6.7 billion. But the giant chip maker's per-share earnings of 51 cents fell short of analyst expectations. Intel said increased sales of its lower-cost Celeron processors were responsible for dragging average selling prices below historic levels.

AMD will now look to its forthcoming Athlon processor for growth, Sanders said. Athlon, formerly known as the K7, is the follow-on to AMD's K6 and will be available in 500MHz, 550MHz and 600MHz versions. The first Athlon-based systems are due to go on sale in August from top-tier PC manufacturers, Sanders said.

Analyst Brookwood said Athlon is "a real barn-burner".

"This is a wonderful product; it's definitely faster than anything Intel has to offer," Brookwood said. "The world by itself isn't going to beat down a path to (AMD's) door, but if they can get the word out how fast this product is I think there's a perfectly good chance it will find a good reception."

AMD in the past has competed with Intel in the market for lower-priced machines, where Intel has been able to flex its economies of scale and respond by reducing prices. In the higher-end market where Athlon is headed, price often takes second place to performance, which could play to AMD's favour, Brookwood said.

Sales from AMD's other chip businesses increased 16 per cent from the first quarter, led by strong sales of flash memory products to cellular phone makers, AMD said.

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