Advanced Micro Devices Inc. warned that it will post a higher than expected loss for the third quarter, blaming continued weak demand for its PC processors and price cuts it has had to make in order to unload rising inventories of unsold chips.
Sales for the quarter, which ended Sunday, totaled about $500 million, well below the $600 million the chip maker garnered the previous quarter and which it had predicted it would match this quarter.
"In the absence of any significant improvement in PC demand in the just completed quarter, we accelerated our efforts to reduce processor inventory in the PC supply chain," Chief Financial Officer Robert Rivet said in a statement issued after the stock market closed on Wednesday. "The aggressive actions we took to lower the total inventory and align the mix with current opportunities had a significant negative impact on our third-quarter processor sales in units, revenues and [average selling prices]."
Much of AMDs financial trouble is related to the companys inability to compete with longtime rival Intel Corp. in the high-end of the PC market, where profit margins are the greatest. In the last year, Intel has widened the speed gap between its top Pentium 4 processors and AMDs fastest Athlon XPs. Intels quickest processor currently is a 2.8GHz Pentium 4 and AMDs is a 2.13GHz Athlon XP 2600+.
Although AMD contends its processors perform about as fast as Pentium 4 chips running at higher frequencies, the company early admitted that its been unable to price its top-end products as high as Intels, undermining its earnings.
Hopes for AMD to finish the year stronger were largely dashed two weeks ago when the company disclosed the launch of its much anticipated 64-bit processor, code-named Clawhammer, was pushed back from the fourth quarter to early next year.
AMD, in Sunnyvale, Calif., will report its third-quarter earnings Oct. 16.