AMD Results Dip Into the Red

UPDATED: AMD showed strong sales for its processors in the third quarter but other businesses dragged overall results slightly into the red.

Advanced Micro Devices was unable to turn a profit for the third quarter, as its flash business dragged the company down into the red.

Although rival Intel Corp. reported its strongest third-quarter sequential growth in 25 years, AMD reported a small loss of $31 million on revenue of $954 million. Third-quarter sales increased by 88 percent from a year ago, however, and the companys loss narrowed significantly from the $254 million AMD reported in the third quarter of 2002.

"Our progress this past quarter is an excellent example of what I hope you will recognize as the new AMD," Hector Ruiz, AMDs chief executive officer, said in a conference call with analysts.

The company said that its Computation Products Group, which houses all of its microprocessor business, increased sales by 91 percent to $503 million compared with the year-ago quarter, and turned a profit, including $19 million of operating income. Both microprocessor revenue and the average selling price of its chips increased, according to Bob Rivet, AMDs chief financial officer. And AMD shipped the highest number of mobile processors ever during the third quarter.

Demand for AMDs processors increased across all product lines and geographic regions, Ruiz added. He said AMD shipped tens of thousands of 64-bit processors in the third quarter, adding that he was "confident" that the company would release hundreds of thousands of 64-bit processors in the fourth quarter.

AMD executives sounded undaunted by Microsoft Corp.s recent decision to delay its 64-bit, AMD-specific OS revisions to Windows until the second half of 2004. AMD executives said their 64-bit processors operate as the best 32-bit chips on the market, and that they offer customers investment protection as more 64-bit applications are deployed.

"A delay of one or two months doesnt change the value proposition in the consumer or enterprise space," said Henri Richard, AMDs senior vice president of worldwide marketing and sales.

AMD will move to a 90-nanometer manufacturing process shortly, Ruiz said, although these products arent expected until the first half of 2004. The finer manufacturing process will allow AMD to manufacture smaller, faster processor dies that consume less power, and allow AMD to ship a mobile version of the Athlon 64 in the second half of 2004. The company will provide more details about its future manufacturing plans later this year, Ruiz said.

"We expect that in the first quarter [of 2004] one-half of our wafer starts will be AMD64," Ruiz said, referring to the companys 64-bit architecture.

At the same time, however, AMDs flash memory business reported a $49 million operating loss, according to Rivet. In June, AMD combined its flash business with that of Fujitsu Ltd., and the merged joint venture, Spansion LLC, now appears on AMDs balance sheet. The combination of AMDs flash business and Spansions operations produced memory sales of $424 million for the quarter, more than double the amount in third quarter of 2002.

During the fourth quarter, AMD said that it expects its operating costs will stay flat at approximately $1 billion, and that sales of CPUs and flash memory will rise.

Although the chipmaker continues to lose money, the company has just about a billion dollars of cash on hand, Rivet said.

Editors note: This story has been updated since its original posting to include information from a conference call with analysts.

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