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AMD shreds 1Q estimates
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April 12, 2000: 8:10 p.m. ET
Chip maker credits strong sales of Athlon processors, flash memory
By Staff Writer Richard Richtmyer
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NEW YORK (CNNfn) - Advanced Micro Devices on Wednesday reported a first-quarter profit that blew past expectations, which executives attributed to strong sales growth across all of the computer-chip maker's product lines.
And executives at AMD (AMD: Research, Estimates) in Sunnyvale, Calif., said they see strong growth throughout the rest of the year.
For the quarter ended April 2, AMD said it earned $189.3 million, or $1.15 per share, nearly double the 58 cents-per-share profit analysts polled by earnings tracker First Call had expected from the Sunnyvale, Calif.-based company.
Sales for the quarter were $1.09 billion, which is up 73 percent from last year's first quarter, and up 13 percent sequentially. The fourth quarter is typically stronger for semiconductor companies because of an increase in sales of PCs during the holiday season.
"AMD had the best quarter in its history," said W.J. Sanders III, AMD's chairman and chief executive, in a conference call with analysts Wednesday.
The quarter's better-than-expected revenue did not come as a surprise. AMD told investors last week that the company was on track to post record sales.
The most recent quarter was the second in a row during which AMD blew past earnings expectations. During the fourth quarter, the company posted net income of 43 cents per share, while analysts had been expecting the company to earn just a penny per share.
AMD shares ended Wednesday's session down 6-1/8, or 8.7 percent, at 64-1/2, amid a broader sell-off in chip stocks, which dragged the Philadelphia Stock Exchange's semiconductor index 8.3 percent lower to 1,037.7.
In after-hours trade on MarketXT, AMD shares were quoted at 80.
Click here for an after-hours quote
Executives credited strong sales of the company's Athlon processors, which were first released last August to compete with Intel's (INTC: Research, Estimates) Pentium III line, as well as flash memory, which is used extensively in portable computing and communications devices, for much of the upside in both quarters.
Sequentially, unit sales of Athlon processors increased 50 percent to 1.2 million units, while total processor sales grew 14 percent, and more than 65 percent year over year, AMD said.
Looking ahead, Sanders said the company is aiming to increase Athlon sales 50 percent to 1.8 million units during the current quarter. He added that overall sales in the current quarter would likely be modestly higher than the first quarter.
"We believe that, with product upgrade cycles, Windows 2000, and the forthcoming Windows Millennium, the PC market will generate unit growth in the high teens this year," Sanders said. "Our previously stated goal of selling more than 25 million processors this year with Athlon family processors accounting for more than half of the total, could prove conservative."
For all of 2000, Sanders said he expects AMD's sales to grow more than 50 percent, outpacing the 20 to 25 percent growth rate that the Semiconductor Association is currently forecasting for the chip industry as a whole.
The company currently has several new products in the pipeline, including a high-performance chip code named "Thunderbird," and a low-end chip called "Spitfire," as well as new version of its K6-2 chip for notebook computers.
"All indications are that we will have an extremely competitive product lineup in the second half, and the customer response is enthusiastic," Sanders said.
During last year's first quarter, AMD posted a loss of 81 cents per share, which was largely the result of a pricing war with Intel, its much larger, deeper-pocketed rival in the market for PC microprocessors.
Given Intel's history, some market observers are wary of a similar battle taking place in the coming months as its tries to knock AMD down a few pegs.
"Intel's primary corporate strategy has been to not, under any circumstances, let anyone else get more than a 20 percent market share," said Mark Grossman, an analyst at SG Cowen Securities in Boston. "AMD is looking at getting 30 percent-plus market share, and I think at some point Intel may try to do something about that. And it could hurt both companies."
But AMD's aggressive new product development efforts have taken away much of Intel's pricing power, which makes that kind of scenario much less likely, according to Dan Niles, technology analyst at Robertson Stephens in San Francisco.
"In the past, Intel has had much higher performance products than AMD had, so they bombed prices on the low end, and kept pricing higher on the high end," Niles said. "This time, AMD's got as speedy processors as Intel does at the high end. There's nothing Intel can do. They can't bomb prices without hurting themselves." 
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