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AMD Posts Loss on Weak Demand, Sales

April 08, 1998| From Bloomberg News

Advanced Micro Devices Inc. on Tuesday reported a wider-than-forecast first-quarter loss, as the Sunnyvale-based chip maker was hurt by production problems with its K6 processor and weakened demand in Asia.

The company said its loss was $55.8 million, or 39 cents a diluted share, compared with net income of $13 million, or 9 cents a diluted share, a year ago. The company was expected to post a loss of 23 cents a share, according to IBES International Inc. Revenue fell 2% to $540.9 million from $552 million.

AMD has reported losses in four of the last five quarters as it struggled to produce adequate supplies of its flagship K6 chip, which competes with chips from rival Intel Corp. Even so, AMD may have turned a corner, saying it solved production problems with the K6. The company said Tuesday it expects strong sales growth in the second quarter and hopes to report a profit in the third quarter.

The good news about AMD's yields--the number of working chips it gets from each silicon wafer--heartened investors, sending shares up as high as $30.88 in trading after the close of U.S. markets. The stock rose 6 cents to close at $30.50 in trading on the New York Stock Exchange before the report.

The loss in the first quarter was the result of falling prices, weak demand in Korea and Japan and a glut of PCs on dealer shelves, in addition to problems making the K6, the company said.

"There were a lot of things that went wrong in the first quarter," said analyst David Wu at ABN Amro Chicago Corp. in San Francisco "They had a weak business and they had major difficulties in ramping production."

AMD's chips are used in low-cost PCs from IBM Corp., Compaq Computer Corp. and others. Intel is responding with its own chip for that market, dubbed the Celeron, which it will introduce later this month.

"We're not merely responding to Intel anymore, we're responding to customers," said Chief Executive Jerry Sanders. AMD has priced its K6 chip, which runs at 300 megahertz, at $246, and has priced its 266-megahertz chip at $156, far more than the average price of $107 it got in the first quarter, said analyst Dan Niles at BancAmerica Robertson Stephens.

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