SUNNYVALE, Calif.--Advanced Micro Devices Inc. is aiming to produce more than a million Athlon microprocessors in the fourth quarter, after reporting a net loss of $105.5 million in the third quarter, ended Sept. 30. AMD hopes the more profitable Athlon MPU and higher prices for flash memories will help it cut losses in the final three months this year.
AMD is confident enough in its ability to compete in PC processors and related semiconductors that the company announced plans to sell off its Communications Group while releasing its financial results on Wednesday. AMD's Communications Group is made up of two divisions selling ICs for telecommunications systems and networking products. The group accounted for about $70 million in revenues in the third quarter, or about 11% of AMD's total sales.
Moving forward, AMD will focus "on convergence, based on a communications-centric PC platform," said W.J. Sanders III, chairman and CEO of the Sunnyvale company. AMD plans to complete the sale of the Communications Group in the first half of 2000(see Oct. 6 story).
In the third quarter, AMD's sales were led by the Athlon processors and flash memory products, according to the company. Total revenues grew 11% from the previous quarter to $662.1 million. However, AMD reported a net income of $79.9 million in the second quarter vs. the $105.5 million net loss in the just-ended period. (AMD's second quarter results included a one-time, after-tax gain of $259.2 million on the sale of its Vantis Corp. programmable logic division to Lattice Semiconductor Corp.)
"Sharply higher sales of flash memories and sales of AMD Athlon processors at higher margins than those experienced on AMD-K6 family processors combined to boost revenues smartly and cut our operating loss by more than $70 million compared to the immediate-prior quarter," declared Sanders.
"Flash memory sales grew by 28% over the immediate-prior quarter," he said. "Flash memory demand is very strong and continues to outstrip our ability to supply, even as we increase production capacity." Industry analysts have reported that overall flash production capacity is falling short of demand, driving up average selling prices.
Sanders said microprocessor unit sales for PCs running Micrsoft Corp.'s Windows operating system grew by more than 20% in the third quarter over the previous three-month period. Overall, AMD shipped more than 4.5 million processors in the PC segment during the third quarter, he said. AMD also introduced its Athlon processor in August to challenge Intel Corp.'s Pentium III (see Aug. 9 story).
"Limited AMD Athlon motherboard availability during the third quarter was exacerbated by the Taiwan earthquake on Sept. 21, which shut off motherboard shipments in the final week of our quarter," Sanders said. "In spite of this, unit sales of AMD Athlon processors attained the hundreds of thousands level."
Sanders claimed end-user demand for AMD's new Athlon processor is being driven by the chip's higher speeds than Intel's Pentium III. He added that the new 700-MHz Athlon, launched this week, is expected to continue AMD's momentum in high-end MPUs.
And Sanders said his company is now executing better in producing 32-bit processors after several disappoint quarters. "Our operational performance last quarter was excellent. Accordingly, we are highly confident that we can produce more than one million AMD Athlon processors in the current quarter," he said.
One bit of caution, however: Sanders said the Taiwan earthquake could have a lingering impact on fourth-quarter PC product shipments.
"In the face of strong demand, unit sales are expected to be gated by infrastructure support limitations resulting from the continuing effects of the Taiwan earthquake," the AMD chairman said. "The most critical items are the motherboards themselves and the components that populate them. Based on all of the currently available information, we believe we still have a good chance of achieving our pre-earthquake goal of cumulative sales of 1 million AMD Athlon processors by year-end."