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Lower estimates for AMD and Intel after US tragedy

Weak back to school sales and international crisis affect chip firms

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Disappointing PC sales at the start of the school year and side effects of terrorist attacks against the US have prompted financial analysts to peg back forecasts for both AMD and Intel.

Thomas Weisel Partners (TWS) reckons that the industry will grow just 2 per cent instead of the 12 per cent expected on the strength of back to school demand, with little effect from recent Pentium 4 price cuts leaving Intel particularly hit.

TWP has lowered third-quarter expected worldwide sales of PC units from 33 million to 30 million and the year's sales for 2001 from 136 million to 124 million. As for next year, Thomas Weisel has lowered expectations from 152 million to 137 million.

Economic uncertainty amid the current international crisis and flash sales down 30 per cent this quarter are expected to impact both major chipmakers, causing TWS to lower its estimates for each.

Intel, which TWS rates as performing to market expectations, is expected to record Q3 revenues of $6.4 billion, down from the $6.5 billion previously predicted. Earnings per share are expected to be down from $0.10 to $0.08 for Q3.

While Intel is ramping up production of P4s, TWS' motherboard contacts have told it logistics issues remain. These include short supplies of the i478 chipset for P4, for which Foxconn of Taiwan is the only approved supplier, and potential shortages of P4 cooling vents. AMD Athlons continue to be competitive with P4s, according to TWS.

AMD, which TWS continues to rate as buy, is expected to record revenues of $800 million for Q3, against $845 million previously predicted. This will result in shareholders seeing a loss per share for Q3 of $0.15 instead of the $0.13 previously estimated. ®

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