AMD's loss widens

October 17, 2001: 6:18 p.m. ET

Chipmaker's bottom line hit hard by price war with deep-pocketed rival.

NEW YORK (CNNmoney) - Advanced Micro Devices on Wednesday reported a wide third-quarter loss on sales that fell more than 36 percent from the same quarter last year.

After the close of trading, the number two supplier of PC microprocessors and flash memory chips said it lost $97.4 million, or 28 cents per share, in the third quarter. That excludes one-time charges and is in line with the loss AMD executives said they was expecting when they announced expectations for quarterly results on Oct. 5.

The company blamed the shortfall on an intensifying price war with Intel, the market leader. Prior to the Oct. 5 announcement, Wall Street generally had expected a quarterly operating loss nearer to 12 cents per share.

Including restructuring and other one-time charges, AMD (AMD: Research, Estimates) said its net loss in the third quarter was $186.9 million, or 54 cents per share. That compares with a net profit of $17.3 million, or 5 cents per share, during the same quarter last year.

At $765.9 million, AMD's third-quarter revenue fell more than 36 percent from the $1.2 billion in sales it reported during the third quarter of 2000.

Although it garners slightly more than 20 percent of the market, AMD has been pecking away at Intel's market share with its Athlon and Duron line of processors. Those advances have prompted its deep-pocketed rival to become even more aggressive in manufacturing and pricing its Pentium 4 line of processors.

That aggressiveness became especially evident in the third quarter, when Intel slashed prices on its Pentium 4 chips by as much as 80 percent in some cases.

"AMD held market share in the 22 percent range in a very weak PC market made more difficult by our principal competitor's efforts to halt our forward momentum," AMD Chairman and Chief Executive Jerry Sanders said in a statement Wednesday.

"Those efforts have failed as the performance deficiencies of computers based on Intel's Pentium 4 processors have become increasingly evident," Sanders added. "Nevertheless, drastic price cuts and large, cash-backed marketing programs from Intel had the effect of driving down [average selling prices] on PC processors in the market segments where we compete directly."

AMD said third-quarter unit sales of Athlon and Duron processors totaled roughly 7.7 million units, which is equal to the unit sales it reported during the second quarter. At the same time, the company said average selling prices, or ASPs, for PC processors declined by 20 percent from the second quarter.

And looking ahead, AMD said its expects the normal seasonal uptick that accompanies the holiday selling season in the fourth quarter "will be muted at best in light of the impact of global economic uncertainty on consumer spending."

Intel made similar comments on Tuesday, when it lowered its revenue forecasts after reporting its third-quarter results.

AMD said it expects fourth-quarter unit sales to be about equal to the third-quarter's level. AMD said it expects fourth-quarter revenue to range from "flat to high single-digit percentage growth."

AMD also said it expects to report another operating loss in the fourth quarter, but it did not provide a specific per-share estimate.

Analysts most recently had been expecting AMD to log a fourth-quarter operating loss of 21 cents per share on revenue of roughly $807.6 million, suggesting a 5.4 percent rise in sales from the third quarter's reported level.