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Advanced Micro Devices Inc. returned to profitability during the fourth quarter of 2003, as strong sales across all segments nearly doubled the companys revenue versus the same period a year ago.
For the companys fourth quarter, AMD reported net income of $43 million on revenue of $1.206 billion, a monumental 76 percent improvement compared with the fourth quarter of 2002, when AMD reported a net loss of $855 million on revenue of $686 million. During the third quarter of 2003, AMD reported a net loss of $31 million on sales of $954 million.
AMDs president and CEO, Hector Ruiz, credited “strong execution” across all of the companys product lines and sales regions. “We join the SIA [Semiconductor Industry Association] and WSTS [World Semiconductor Trade Statistics organization] as well as other industry leaders who share our optimism for the coming year,” Ruiz said.
For 2003 as a whole, AMD reported a net loss of $274 million on sales of $3.5 billion, versus a loss of $1.3 billion on revenue of $2.7 billion during 2002.
Although AMD is often thought of as a microprocessor company, revenue from the companys flash business, a joint venture with Fujitsu Ltd. known as Spansion LLC, nearly equaled the companys microprocessor sales.
AMDs Computation Products Group reported sales of $581 million, up 38 percent from a year ago, as the average selling price of microprocessors rose compared with a year ago. The unit sold more processors at a higher average selling price than in the previous quarter, Robert Rivet, AMDs chief financial officer, told investors, and the unit reported $63 million in operating income.
AMD will have to continue to negotiate a delicate transition to 90-nm processes, a gap that has tripped up other semiconductor firms in the past. Intel Corp.s delay of the Dothan processor prompted some analysts to speculate that the company was having problems with its own 90-nm transition, although they later concluded that the chips delay seems to be tied to design issues with the chip itself. Rivet said AMD expects to produce its first 90-nm wafers during the first half of this year; Ruiz said later that chips built on the technology are expected in the second half of the year.
AMD sold a “very small quantity” of Duron processors during the fourth quarter, and AMD expects to sell an “irrelevant” quantity of Durons during the first quarter, said Dirk Meyer, executive vice president of the CPG.
Next page: A jump in AMDs flash revenue.
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AMDs flash business, meanwhile, recorded $566 million worth of revenue, which jumped 166 percent from the same period a year ago. AMDs flash business reported a $3 million operating loss for the quarter, however, partially because of strong competition in low-end products.
Although AMD and Intel virtually dominate the high-end NOR flash business, a number of companies are in “scrambling for survival” mode, selling off low-end flash products at cut-rate prices, executives said. AMDs line of “MirrorBit” flash—which stores two bits of data in a single flash cell—has been the companys strongest seller, followed by its Multi-Chip Package (MCP) line.
During the third quarter of 2003, AMD closed its flash lines temporarily to allow the market to pick up. “Since that time, activity has increased dramatically,” Ruiz said, and the low-end market will actually be “tight,” or somewhat supply-constrained, until the second quarter of this year, he said. Lead times have been as high as 13 weeks, executives said.
For the year, AMD expects to spend about $1.5 billion in capital expenditures, the majority of which will be used to build AMDs new Fab 36 in Dresden, Germany; fund the expansion of Spansion; and convert Fab 30s production lines to 90 nanometers. Fab 36 will also produce AMDs first 300-mm wafers beginning in 2006, Ruiz said
AMD kept a tight lip on its first-quarter outlook, however, stating only that both the company and its microprocessor division expect slightly lower revenue consistent with the typical seasonal decline that occurs in the first quarter. AMD expects flat flash revenue, the company said.
“Looking forward, we are increasingly confident about our capacity to succeed,” Ruiz concluded.
(Editors Note: This story has been updated since its original posting to include additional financial information and comments from AMDs Ruiz.)