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AMD raises Q4 guidance
ADVANCED MICRO DEVICES (AMD) raised its guidance for its fourth-quarter revenue Thursday, citing stronger-than-expected demand for its Athlon XP PC processors and flash memory products, the company said in a release.
Fourth-quarter revenue will be about $700 million, which is 35 percent higher than the company's third-quarter revenue, AMD said. The company previously said fourth-quarter revenue would be 20 percent higher than its third-quarter results during its last earnings conference call.
"We've had two success factors. One is the nice seasonal uptick in the consumer PC market, and we've really been addressing the PC supply chain inventory, which has got us into a much better balance situation in the market," said AMD Chief Financial Officer Robert Rivet, during his presentation Thursday at the Credit Suisse First Boston technology conference in Scottsdale, Arizona. The presentation was webcast.
AMD's financial situation has been rocky over the past year amid an industry-wide slump in demand for PC processors. Lagging demand for the company's flagship Athlon XP processors coupled with an increase in chip production earlier this year resulted in AMD having to cut chip production in the third quarter to reduce its inventory of processors.
The company posted a third-quarter net loss of $254 million on revenue of $508 million, and announced it would lay off 2,000 workers over the next six months as part of a plan to cut expenses by $350 million. AMD will take a $100 million charge in the fourth quarter as a result of the layoffs, Rivet said.
Without financial credibility, we have no credibility," Rivet said. "Our cost-management strategy is imperative to our immediate success, but you can't cut your way to success."
The increased demand for AMD's PC processors could signal a coming rebound in the long-depressed PC market. AMD has seen the hottest sales among its midrange processors, such as the Athlon XP 1800+, said Rivet, despite the recent launches of the Athlon XP 2700+ and 2800+ processors.
The fourth quarter is a traditionally strong season for PC purchases, but analysts have been unsure if this year would follow suit.
"It's a positive sign, but I would caution that because it's seasonally driven, we don't expect it to continue into the first half of next year, as far as units go," said Eric Ross, principal analyst at market research firm Investec, in New York, in an interview before the AMD webcast. Investec expects the PC market to increase by about 10 percent in the fourth quarter, compared to a 10-year average of about 20 percent growth in the fourth quarter, he said.
AMD's third-quarter inventory problems also make the fourth-quarter numbers look better, he said. "They are shipping more to true demand now, maybe a little higher in end products. The increase is impressive, but the third quarter was artificially depressed due to the inventory problems," he said.
AMD's long-awaited 64-bit Hammer architecture will be released in the form of the Opteron server chip in March or April of 2003, Rivet said. The Hammer architecture allows users to run both 32-bit and 64-bit applications on the Opteron or Athlon 64 processors. Opteron will be positioned to compete against the 32-bit Xeon server processor from AMD rival Intel, he said.
Flash memory will continue to be a strong segment of AMD's business, especially as high-end cell phones emerge in 2003 with data-exchange capabilities, color screens, and built-in cameras, Rivet said. The company will also focus on the thin-and-light notebook market, and will announce several design wins in the first quarter of 2003, he said.
Intel is scheduled to provide updated fourth-quarter guidance after the close of the U.S. stock market Thursday. Investec expects Intel to either slightly raise its range for fourth-quarter revenue expectations or to announce it will post numbers at the high end of the previous range, Ross said. When Intel announced its third-quarter results, it predicted fourth-quarter revenue of $6.5 billion to $6.9 billion. By Tom Krazit, infoworld
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