|
AMD president resigns
|
 |
July 14, 1999: 9:03 p.m. ET
Chip maker posts second-quarter operating loss of $162 million
|
NEW YORK (CNNfn) - Advanced Micro Devices Inc. posted a substantial second-quarter operating loss Wednesday and, in another setback for the beleaguered chip maker, the president and chief operating officer announced he is resigning.
In a statement issued after the markets had closed, AMD said President and Chief Operating Officer Atiq Raza is stepping down for "personal reasons" and would begin a leave of absence Monday. AMD said Raza will assess a possible future role with the company.
Analysts said Raza's departure is a blow to AMD as it struggles to compete with arch-rival Intel Corp.
"Atiq was a key person in bringing back credibility for the company and now it's same-old same-old," said Ashok Kumar, analyst at US Bancorp Piper Jaffray. "This is unfortunate. Clearly the company was positioning itself for a turnaround and without the captain at the helm it's very difficult."
"When it rains, it always seems to pour at AMD," S.G. Cowen analyst Drew Peck told CNNfn's Digital Jam.
Raza, who is also chief technical officer, joined AMD in 1996 following AMD's acquisition of NexGen, Inc., where he was chairman, chief executive officer and president. AMD acquired NexGen to provide stiffer competition to Intel. But, a series of nagging production problems have kept AMD from selling as many chips as the company would have liked.
AMD posts big operating losses
AMD's production problems have contributed mightily to the company's mounting losses. For the three months ended, June 27, the Sunnyvale, Calif.-based company posted an operating loss of $162 million, or $1.10 per share, on revenue of $595 million. The results were slightly better than AMD had forecast last month when it warned analysts it would post a loss of about $200 million for the quarter.
However, the latest figures were far worse than the company's year-ago results, when AMD (AMD) lost $64.6 million, or 45 cents a share, on $526.5 million in revenue.
This year's second-quarter operating results exclude a one-time gain of $259 million from the sale of AMD's Vantis subsidiary, as well as charges totaling $17.5 million. Including those items, AMD recorded a profit of $79.9 million, or 53 cents a share.
Losing the price war
AMD's revenue took a beating as it cut prices to compete in the low-cost PC market with rival Intel. Second-quarter revenue tumbled 6 percent from the first-quarter and the average selling price of AMD's K-6 chip was $67 in the second quarter, compared with $78 in the first quarter.
Shipping volumes were also down as Intel sought to regain market share in the low end of the market.
AMD sold 3.7 million K6 processors in the second quarter, compared with 4.3 million in the previous quarter.
In a statement, AMD Chairman and Chief Executive Officer W.J. Saunders painted a bleak picture.
"In the face of Intel's intensifying aggression in the consumer sector of the PC market… further gains in unit market share or revenue growth are unlikely," Sanders said.
That battle also took a toll on Intel's earnings, albeit to a much lesser degree. On Tuesday, Intel reported second-quarter earnings that fell slightly short of analysts estimates, due in part to a decline in average selling prices as it moved more aggressively to gain market share in the retail PC market.
Unlike Intel (INTC), however, AMD did not have a line of high-end chips to offset pricing pressures in the low-end of the market.
But, the company hopes to change that with the recently-introduced Athlon processor, formerly known as the K-7. AMD said it began shipping the Athlon in June at speeds of up to 600 megahertz, meaning AMD now offers the fastest clock speed of any processor being shipped.
However, AMD officials said the Athlon is not expected to ship in large volumes until later this year. Sanders told analysts AMD expects to ship 1 million Athlon chips in the fourth quarter.
Cowen's Peck said the Athlon is clearly a make-or-break product for AMD.
"If the K-7 doesn't sell, they have to get out of the processor business," Peck said. "They've really bet the company on the K-7."
For the first half of fiscal 1999, including the gain for the Vantis sale, AMD reported a loss of $48.4 million, or 33 cents a share, on $1.2 billion in revenue, compared with first-half 1998 losses of $127.3 million, or 89 cents a share, on $1.1 billion in revenue.
AMD shares rose 15/16 to close at 18 on the New York Stock Exchange prior to the earnings announcement. 
-- from staff and wire reports
|
|
|
|
|
|
AMD
|
Note: Pages will open in a new browser window
External sites are not endorsed by CNNmoney
|
|
|
|
 |
|
