AMD blames SARS for declining revenues

JUNE 25–SUNNYVALE, CALIF.–Advanced Micro Devices Inc., the world’s No. 2 maker of personal computer processor chips, cut its second-quarter sales forecast by $100 million Tuesday because the company’s expected June sales increase didn’t develop.

Sales will rise to about $615 million, missing the company’s forecast of at least $715 million, the Sunnyvale, Calif.-based company said in a statement. Thomson Financial’s survey of analysts said sales had been forecast to rise to $723 million. Sales were $600.3 million in the same period a year ago. The stock fell as much as 12 percent on the news, but closed at $6.31, down 4.25 percent. The shares are down 29 percent for the year.

Sales of PC and mobile-phone chips this month have missed estimates in Asian markets as shoppers have stayed home to avoid severe acute respiratory syndrome, AMD said. Chief executive Hector Ruiz has joined his counterparts at Texas Instruments Inc., Motorola Inc. and Nokia Corp. in blaming SARS for lost revenue.

“This SARS thing has become the dog-ate-my-lunch excuse, and that applies to Advanced Micro Devices,” Paul Martin of Martin Capital Advisors LLP said. “They’re just not managing their business as well as Intel.”

AMD and Intel Corp. are relying more on sales to smaller, local vendors in shopping malls and corner stores that sell cheaper, generic “white box” PCs.

China is the world’s biggest PC market outside the United States, according to IDC, a research firm. Legend Group Ltd., Asia’s biggest PC maker, and its five smaller rivals in the region controlled 41 percent of the Asian PC market in the first quarter, leaving the remainder to even smaller sellers.

“AMD has a lot more exposure to the local computer brands in China than Intel does,” said John Lau, an analyst at RBC Capital Markets. “It continues to be a very difficult road for them.”

Intel, whose processors run about 75 percent of all PCs, said June 5 that its sales will rise as much as 7.6 percent this quarter to $6.8 billion, even with SARS.

AMD has lost money for seven quarters in a row. The company, which employs 3,000 people in Austin, has cut jobs and is combining its flash-memory division with Fujitsu Ltd.’s in a bid to restore profit.

That joint venture, FASL LLC, will make memory chips for devices such as cell phones and digital cameras. Operations are set to begin in the third quarter.

Texas Instruments, the world’s biggest maker of chips that power cell phones, said June 10 that sales and profit this quarter would lag its forecast because of a SARS-related drop in demand for wireless handsets in Asia.

That cut followed pared estimates by two of the company’s biggest customers, Motorola and Nokia, which blamed SARS in part for lower sales and excess supplies of cell phones.


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