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AMD admits yield problem on whole chip front

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Updated Chip manufacturer AMD said late yesterday that its K7 processor will not now ship in June, as it had anticipated. At the same time, the company said there was a substantial decline in its first quarter and all processor shipments have been badly affected. Severe price competition caused revenues to slip, said AMD, while it also had problems shipping K6-2 processors because of yield problems. The company said its Q1 revenues are likely to be $630 million, compared to revenues of $789 million in the last financial quarter. Price competition forced the average selling price of its CPUs to $78. It only managed to ship 4.3 million microprocessors in the quarter. Last week, AMD filed a form 10K with the Securities and Equities Commission giving more details about the impact of Intel's pricing on its business (see SEC filing shows depth of AMD CPU concerns). The statement about the K7 comes tucked away at the end of the press release. It says: "...the AMD K7 processor introduction will slip from its current schedule for introduction in limited quantities in June". This is very bad news for AMD. Its financial results come out next week, while it also faces a barrage of class actions from aggrieved shareholders. However, Robert Stead, European marketing director of AMD, entered a caveat on this story later on today. He said: "The K7 is absolutely on schedule. Part of our response to investors is to warn them about the risks. There is a risk, but it [the K7] is not delayed. The K7 will be launched in the first half of 1999." We asked Stead why, then, the cautionary statement said the K7 might slip. He said: "This is for the benefit of people that invest in AMD. We have to indemnify any risks." Fair enough. But will the K7 be late, we asked again. He insisted it would not. So this is a story and not a story at the same time. Do all US companies have to say yes it will and yes it won't at the same time, we wonder? And, if so, why? ®

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