AMD to fall well short of earnings, revenue estimates

SAN JOSE, Calif. (AP) -- Despite record sales of its computer processors, chip-maker Advanced Micro Devices warned second-quarter earnings will fall far short of expectations.

The news sent shares down 16 percent in after-hours trading Thursday.

Sales of Athlon and Duron PC processors could not overcome the continuing slump in demand for flash memory chips used in digital cameras, cell phones and other electronic devices, the company said Thursday.

Overall, AMD's second-quarter sales declined 17 percent compared to the first quarter. The company had projected second-quarter sales could decline as much as 10 percent when it posted first-quarter results in April.

AMD, which will release its second-quarter results on July 12, also said net earnings will range from 3 cents to 5 cents per diluted share. Analysts were expecting 27 cents per share, according to Thomson Financial/First Call.

In the year-ago period, AMD earned 61 cents per share.

AMD said sales for the second quarter were $985 million, down significantly from the first quarter sales of $1.19 billion. The results are also a 11 percent decrease from the second quarter of 2000.

Intel's aggressive price-cutting on its Pentium processors also appears to have bit into AMD's bottom line, analysts said.

"They did ship record processor units -- it's a strong endorsement of AMD's product," said Eric Rothdeutsch, an analyst at Robertson Stephens. "But it's clear they had to do some heavy-duty discounting."

"They had to cut prices so much that it affected their profitability," said Douglas Lee, analyst at Banc of America Securities.

Shares of AMD fell $4.64 to $24 in after-hours trading after finishing the day down $1.12 at $28.64 on the New York Stock Exchange. Intel shares also were pulled down on the news, falling nearly 4 percent to $28.64 in after-hours trading, after closing the regular session down 62 cents at $29.84.

The earnings warning appears to be further evidence that the semiconductor industry has not hit the bottom of a slump that began late last year.

Last month, chip makers Applied Micro Circuits Corp., Vitesse Semiconductor Corp., PMC-Sierra Inc. and several other chip makers downgraded their guidance.

"We're in for a very bad year still," Lee said.

Intel Corp. said in early June that it was seeing some stability in its markets and predicted revenues would be within the estimates the company provided in April.