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AMD chalks up huge loss, admits to extended red zone

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ComputerWire: IT Industry Intelligence

Advanced Micro Devices Inc yesterday admitted that it will continue to bleed red ink for the immediate future, as it unveiled a massive loss for its second quarter.

The company will be under further pressure in the months ahead, as it tries to make the best of what is likely to be no more than an anemic recovery in the run-up to the crucial launch of its Hammer technology.

The Sunnyvale, California-based chip vendor lowered its forecasts for the second quarter twice, successively sliding from an original target of sales of $820m to $900m, to $620m to $700m, and finally to $600m.

Yesterday, its final figures showed revenues of $600.3m, down 39.1% on last year. The vendor made an operating loss of $296.7m, compared to a $21.7m profit last year. Net losses were $184.9m, compared to a $17.4m profit last year. The loss per share was $0.54, well above the $0.45 per share loss Wall Street had predicted.

For the third quarter, AMD expects to see sequential sales growth in its flash products, with PC processor sales showing a seasonal sequential increase on the second quarter. CEO Hector Ruiz said traditional seasonal growth for the third quarter ranged from 4% to 14%, but that it expected this year would veer towards the lower end of the range.

Analysts certainly don't expect the company to turn a profit until next year. In the meantime, Ruiz said the company would be putting a lot of effort into "managing the balance sheet judiciously and carefully."

This will still not be enough to push the company back in the black. The company said it had lowered its break-even revenue point to $900m. Hitting this level would be a stretch given how far sales have slipped. AMD said it expected a modest improvement in sales in the third quarter, and acknowledged it would report a loss for the period.

The company blamed its figures on a weaker than expected PC market, particularly in Europe. AMD and Intel have engaged in vicious price-cutting over the last quarter as they battle in a sluggish PC sector. PC processor sales were down by 35% on the first quarter. Desktop processors were the worst affected, down 44%, while mobile processor sales were flat. The company said it had lowered processor inventories in the PC supply chain in the quarter "to help better position its customers in the current market environment." Memory product sales were down 45% on the year, but were up 9% on the previous quarter.

For the year to date, sales were off 30.9% to $1.5bn, with a net loss of $194m, compared to a profit last year of $142m.

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