AMD Drops Q2 Sales Forecast

Microprocessor manufacturer Advanced Micro Devices waited until after business hours July 6 to announce that it has cut its sales forecast for Q2, saying it expects income from its chips to fall 9 percent from its first-quarter results.

The Sunnyvale, Calif., company had previously forecast that sales would be flat to slightly down from the prior quarter.

AMD is the worlds second-largest producer of microprocessors, trailing Intel of Santa Clara, Calif.

The company said it expected second-quarter sales of about $1.22 billion, an increase from a year earlier but below analysts average forecast of $1.31 billion, according to Reuters estimates.

Record AMD Opteron processor sales were driven by continued strong demand for single-, dual- and multi-socket configurations for servers and workstations, the company said in a statement.

However, sales of entry-level and mainstream mobile and desktop processors were down substantially, which led to the big sales falloff.

AMD spokesman Dave Kroll told eWEEK later in the evening that the company would have no comment at this time, saying “the lawyers have us on a tight leash on this … youll have to stay tuned for earnings and find out more detail on that call.”

In May, AMDs stock price increased on the news that PC maker Dell Inc. of Round Rock, Texas, would begin using AMD chips in its high-end servers and would terminate its exclusive chip-buying relationship with Intel.

Roger Kay, an analyst with Endpoint Technologies Associates, said AMD could be suffering from a combination of an industrywide slow second quarter and Intels aggressive pricing. The second quarter is usually a slow one in the PC space, before it picks up with back-to-school sales in the third quarter. In addition, Intel is cutting prices as a way of slowing AMDs momentum.

“AMD on the server side is certainly enterprise-focused,” said Kay, in Wayland, Mass. “But on the desktop side, its heavily consumer. This may reflect a segment focus, and there may also be competitive pressure from Intel.”

There are a number of factors weighing on consumers that may be feeding their reluctance to buy PCs, from their current systems being good enough and credit concerns to higher fuel costs and the delay of Microsofts Windows Vista operating system, Kay said. These may be enough to impact the entire industry for the rest of 2006.

“Theres enough negatives where I think its going to affect the whole year,” he said, though he admitted that other industry observers are more optimistic.

AMD will report its second quarter 2006 results after market close on July 20. AMD will provide a real-time audio broadcast of the teleconference on the investor relations page of its Web site.

At the close of trading July 6, AMDs stock was at $23.83, down $0.07 cents on the day.

Editors Note: This story was updated to include additional financial detail and comment from an AMD spokesman.

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