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Advanced Micro Devices Posts a Slight Profit

Earnings: Surprise results underscore popularity of its line of low-cost microprocessors.

October 07, 1998|From Bloomberg News

Advanced Micro Devices Inc. on Wednesday reported a surprising third-quarter profit as the chip maker sold more of its processors that compete with Intel Corp.'s Pentium and staved off steep price declines.

Profit was $1.01 million, or 1 cent a diluted share, compared with a loss of $31.7 million, or 22 cents a share, a year ago. Analysts expected AMD to lose 11 cents a share, according to First Call Corp. Sales rose 15% to $685.9 million from $596.6 million a year ago.

Before the unexpected profit, AMD had posted losses for four consecutive quarters as it struggled with production problems with its K6 microprocessor and falling chip prices. The company has been working to get production up to speed and add customers for the chip. The average selling price for the K6 increased to more than $100 from $86 in the second quarter.

"They are doing a good job getting themselves back on track," said analyst Dan Niles of BancBoston Robertson Stephens, who had expected a loss of 5 cents a share. "People like the low-end products that AMD is selling."

AMD shares rose $1.50 to close at $19.88 on the New York Stock Exchange. The Sunnyvale-based company reported third-quarter results after the close of regular U.S. trading.

AMD is the second-largest maker of microprocessors, behind Intel, in the so-called x86 market, which are the brains of most PCs.

At the end of 1997, Intel held 86.1% of that market and AMD had 6.8%, though analysts say AMD is gaining.

As consumers and corporate buyers have flocked to personal computers that cost less than $1,500, AMD has benefited from having processors aimed at that market. Intel, the No. 1 computer-chip maker, ignored that market until this year, and only in the past few months has introduced faster, competitive versions of its inexpensive Celeron chip.

AMD said it shipped 3.8 million processors in the quarter, and sales of the K6 chip rose 70% from the second quarter.

AMD's chips now are used in inexpensive machines made by IBM Corp., Compaq Computer Corp. and several others, and analysts are forecasting unit shipments to rise 30% in the next quarter as AMD continues to take market share away from Intel.

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