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AMD posts loss despite sales jump

The chip maker reports $600 million in red ink in the second quarter, hurt by a price war with Intel. Revenue rises 13%.

July 20, 2007|Michelle Quinn | Times Staff Writer

Advanced Micro Devices Inc. on Thursday posted its third consecutive quarterly loss but offered investors hope for a turnaround and vowed to break even by year's end.

Its shares rose 2% to $15.78 in regular trading, then jumped 5% to $16.52 in late trading after the earnings report.

AMD said growing demand for notebook computer chips helped the company increase shipments of microprocessors in the second quarter by 38%.

The No. 2 PC chip maker's revenue in the period rose 13% to $1.38 billion, surpassing the $1.26 billion expected by analysts surveyed by Thomson Financial.

"The second quarter was an important one for AMD," said Hector Ruiz, the Sunnyvale, Calif.-based company's chief executive and chairman. "The business has matured."

But a tough price war with rival Intel Corp. meant that more shipments didn't translate to profit. AMD posted a loss of $600 million, or $1.09 a share, compared with a gain of $89 million, or 18 cents, a year earlier.

AMD has been battling a re-energized Intel by slashing prices, introducing new products and moving into new markets.

But it stumbled in the first quarter when it was caught with excess inventory after manufacturing more chips than PC makers needed.

On Thursday, AMD executives painted a cautiously optimistic picture but acknowledged that the bottom line had been hurt by one-time expenses, such as a $30-million inventory write-off and $130 million in charges related to its $5.6-billion acquisition of graphics chip maker ATI Technologies Inc.

Excluding those items, AMD said it would have lost 85 cents a share, which is what analysts had expected.

A preliminary report from ISuppli Corp., an El Segundo-based market research firm, said AMD had inched up in market share. In the second quarter, AMD accounted for 11.4% of microprocessor sales, up from 10.9% in the first quarter. At its height in the third quarter of 2006, AMD captured 16.8% of the market.

Intel's market share fell to 80.3% in the second quarter from 80.8% the previous quarter, ISuppli said.

In a conference call with analysts after the earnings report, AMD executives said that the company would not retreat from its plan to capture market share by lowering prices, but they also said that they would improve AMD's profit margins and cut costs. They did not explain how.

Industry analysts say AMD is poised to benefit from strong demand for personal computers. The company recently said Toshiba Corp. would use AMD chips in new notebook computers.

"The question is whether things are getting better or getting worse," said Cody Acree, managing director at Stifel, Nicolaus & Co., a St. Louis brokerage and investment bank. "The balance of supply and demand is shifting to help pricing stabilize."

michelle.quinn@latimes.com

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