AMD misses on fourth-quarter earnings

NEWS Advanced Micro Devices last week reported a larger-than-expected fourth-quarter loss, despite revenue from processor shipments rising by 60 percent from the preceding period. The chipmaker posted a quarterly loss of $854m, or $2.49 per share, including restructuring charges. Revenue for the quarter, which ended 29 December, was $686m, up 35 percent sequentially from the third quarter. Before charges, AMD lost $235m, or 68 cents per share, for the quarter. During the same period a year earlier, the company lost $15m, or 5 cents per share. Analysts had expected AMD to post a loss of 42 cents per share on revenue of $683m, according to FirstCall. The chipmaker also missed its own expectations for the quarter by a hair. In December, the company had increased its projected revenue for the quarter to about $700m. But the chipmaker had originally predicted only a 20 percent increase in revenue for the quarter. AMD said that although the numbers were tough to swallow, during the quarter it saw double-digit increases in revenue from both of its major product lines -- PC processors and flash memory -- and also raised $400m in cash and lowered projected debts for 2003. The company, which has been working to burn off inventories of its older chips in the market, saw increases for both its processor unit shipments and prices during the quarter. It sold greater numbers of desktop chips with high model numbers, like the Athlon XP 2800+, and more notebook Athlon XPs. The result was a jump in processor revenue from $262m in the third quarter to $420m in the fourth quarter. Meanwhile, flash memory revenue rose by 15 percent to $217m over the same time. "As projected, we saw increased PC processor and flash memory sales in the fourth quarter," Robert Rivet, AMD's chief financial officer, said in a statement. "We executed on our plan to align AMD PC processor inventory in the supply chain." For all of 2002, AMD recorded revenue of $2.7bn and a loss of $1.3bn, or $3.81 per share, after charges. Excluding charges, it lost $683m or $2 per share. Analysts had expected the company to lose $1.73 per share and record revenue of $2.7bn for the year, according to FirstCall. With the restructuring under way and the charges associated with the plan now behind it, AMD is focused on the future, its senior executives said. "It is important to reflect on the fact that 2002 was an awful year. But we think the worst is behind us," Hector de Ruiz, AMD's chief executive, said during a conference call to discuss the company's results. AMD plans to exploit the lower costs delivered by its restructuring to get back to break-even point and eventually profitability. To get there, it will execute a strategy to tap the business market, while keeping pace in the consumer space with higher performance versions of its Athlon XP chip for desktops and notebooks. Despite the typical 5 percent to 8 percent PC processor shipment declines seen in past first quarters, AMD believes it can still grow its first-quarter processor revenue by introducing new Athlon XP models. The richer mix, AMD predicts, will result in first-quarter revenue that stays flat or increases slightly from the fourth quarter's $683m. AMD will give Athlon XP a shot in the arm with the introduction of a new processor core. Chips using the new core, dubbed Barton, will be introduced next month. Meanwhile, the debut of the company's Opteron chip -- the keystone of its strategy to attack the business market -- is set for April, while the release of a desktop version of the chip, dubbed Athlon 64, has suddenly become murky. Earlier, AMD said it planned to release the Athlon 64 chip in March or April. Now, the company says it is evaluating the release date. The Opteron, designed for servers used by businesses, will run at 2GHz or more and deliver 64-bit addressing, a performance enhancement for heavy-duty applications like databases. AMD is also looking down the road at new manufacturing technologies. It will make the transition from its current 130 nanometer manufacturing process to a new 90-nanometre process starting in the fourth quarter of this year. It will also work with IBM, under a recently announced agreement, to gain the technology to manufacture chips on 65-nanometre and 40-nanometre processes, starting around 2005. Finally, AMD is also evaluating its options for a new chip plant. The company is investigating joint ventures with partners in Asia, Europe and the United States, Ruiz said.

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