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Chip maker Advanced Micro Devices will be disappointing Wall Street once again. But, then again, Wall Street has been particularly disappointing for the past several months itself.

AMD this morning issued a terse two-line statement explaining the situation. The first sentence explained that for the quarter ending December 27 sales would be approximately 25 per cent lower than the third quarter of this year, when AMD raked in $1.585bn. (That revenue from Q3 2008 did not include process technology license revenue, and presumably AMD will be breaking out this item separately as it spins out its foundry business.)

Anyway, when you do the math, that works out to $396m in sales vanishing into thin air, and that puts revenues at $1.19bn. AMD did a sequential comparison of Q3 to Q4 projections because it didn't want you to do the year-on-year comparison, which is worse. In the year-ago quarter, AMD reported sales of $1.77bn and booked a net loss of $1.77bn after writing off its ATI acquisition and restructuring charges. It's hard to calculate what the drop in chip sales will be without knowing what technology licensing revenues were a year ago, but it could be steeper than a 25 per cent dive.

The second sentence explained why AMD missed the quarter: "The decrease is due to weaker than expected demand across all geographies and businesses, particularly in the consumer market."

Because Wall Street makes so much sense these days, AMD's stock actually rose by .45 per cent on the news, to $2.21 per share, as we go to press. Go figure. Perhaps the geniuses downtown here in New York are expecting lots of job cuts on the news. In a universe that made more sense, such a big miss would have caused the stock to dive.

Later this morning, Bob Rivet, AMD's chief financial officer, is giving a presentation at the Credit Suisse Annual Technology Conference in Scottsdale, Arizona, and will undoubtedly be pressed for more details about the quarter. And Rivet will probably deflect most of the questions because AMD doesn't report its financial results for Q2 until January 22, 2009.

AMD's impending big miss on Q4 comes only a few weeks after Intel, AMD's bigger and profitable rival, said its fourth quarter would be down. Specifically, Intel said it expected sales in Q4 to range from $8.7bn to $9.3bn, down from its earlier forecast of $10.1bn to $10.9bn. Intel also said back then that demand for chips was weaker across all geographies. Isn't globalization fun?

Forecasts for the chip business have been cut back in recent weeks as well because of the expectation that businesses and consumers will be cutting back on spending on the myriad gadgets that use chips. Two weeks ago, the Semiconductor Industry Association said that it expected chip sales worldwide to decline by 5.6 per cent to $246.7bn. Interestingly, the SIA also said it expected a 5.9 per cent decline in chip sales globally in the fourth quarter - usually the strongest one in the year - in 2008 after seeing growth in the first three quarters of this year. The SIA is expecting a rebound of 7.4 per cent in chip sales in 2010 and 7.5 per cent growth in 2011, but these projections are probably not worth the paper they are written on.

Earlier in November, the analysts at Gartner chopped their own chip forecasts for 2009, indicating that it expected semiconductor sales to rise by one per cent to $282.2bn. Prior to the revision, Gartner had expected chip sales to grow in 2009 by 7.8 per cent to $307.7bn. ®

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