AMD raises Q4 guidance on strong PC chip demand

Advanced Micro Devices (AMD) raised its guidance for its fourth-quarter revenue yesterday, citing stronger-than-expected demand for its Athlon XP PC processors and flash memory products.

Fourth-quarter revenue will be about US$700 million, which is 35 per cent higher than the company's third-quarter revenue, AMD said. The company previously said fourth-quarter revenue would be 20 per cent higher than its third-quarter results.

"We've had two success factors. One is the nice seasonal uptick in the consumer PC market, and we've really been addressing the PC supply chain inventory, which has got us into a much better balance situation in the market," said AMD chief financial officer Robert Rivet, during his presentation at the Credit Suisse First Boston technology conference in Scottsdale, Arizona.

AMD's financial situation has been rocky over the past year amid an industry-wide slump in demand for PC processors. Lagging demand for the company's flagship Athlon XP processors coupled with an increase in chip production earlier this year resulted in AMD having to cut chip production in the third quarter to reduce its inventory of processors.

The company posted a third-quarter net loss of $254 million on revenue of $508 million, and announced it would lay off 2,000 workers over the next six months as part of a plan to cut expenses by $350 million. AMD will take a $100 million charge in the fourth quarter as a result of the layoffs, Rivet said.

"Without financial credibility, we have no credibility," Rivet said. "Our cost-management strategy is imperative to our immediate success, but you can't cut your way to success."

AMD has seen the hottest sales among its midrange processors, such as the Athlon XP 1800+, said Rivet, despite the recent launches of the Athlon XP 2700+ and 2800+ processors.

Flash memory will continue to be a strong segment of AMD's business, especially as high-end cell phones emerge in 2003 with data-exchange capabilities, colour screens and built-in cameras, Rivet said. The company will also focus on the thin-and-light notebook market, and will announce several design wins in the first quarter of 2003, he said.