AMD warns of first-quarter loss

Under heavy pricing pressure from rival Intel, microprocessor maker Advanced Micro Devices (AMD) issued a warning today that it may incur an operating loss in its first fiscal quarter, which ends in March.

The latest consensus estimate from brokers polled by First Call was for AMD to post a profit of 13 US cents per share for the quarter. In the first fiscal quarter of 1998 the company reported a loss of 39 cents per share.

The news from AMD has sent the company's stock price into a downward spin this week. AMD's shares closed at $US18.94 today, down $US2, or almost 10 per cent, from last night's close.

"In the light of Intel's recent pull-in of its February 28 price reductions to February 8, and pending product announcements, we are re-assessing our competitive response," Jerry Sanders, AMD's CEO, said in a statement.

AMD expects to produce a greater number of faster microprocessors in the quarter, which command higher selling prices. But the pricing pressure from Intel, combined with planned research and development spending, means AMD could incur a loss for the quarter, Sanders said.

Analysts say AMD has successfully gained share in the PC microprocessor market at Intel's expense in recent quarters, particularly in the market for low-cost computers. But Intel has responded by saying it will continue to cut prices aggressively in order to regain its share, which traditionally has been above 80 per cent.

In a poor day for semiconductor stocks, Intel's shares also fell today, down $US8.56, or about 6 per cent, to close at $US130.12.

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James Niccolai

PC World
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