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AMD sees operating loss in Q2, shortfall in revenue

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CIOL Bureau
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Duncan Martell

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SAN FRANCISCO: Advanced Micro Devices Inc. on Tuesday said it expects a

"substantial" second quarter operating loss as weakness in PC sales

will cause revenues to fall far short of estimates, and its shares fell in after

hours trade.

AMD, Intel Corp.'s chief rival in the microprocessor market, said it sees

sales for the quarter at $620 million to $700 million range, off from its

previous projection of $820 million to $900 million.

As a result, AMD said it anticipates "a substantial operating loss"

for the quarter. Analysts surveyed by First Call had on average predicted a loss

of about 9 cents. In the same period one year ago, the company reported a profit

of 5 cents a share, on revenues of $985 million.

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"As we have seen in previous statements from a number of other

companies, there is broad weakness in the personal computer market and it is

adversely affecting AMD," said Robert Rivet, AMD's chief financial officer,

said in a release.

Shares of Sunnyvale, California-based AMD fell to $8.50 on Instinet after the

announcement, down from its close of $10.30 on the New York Stock Exchange

today. Intel shares also fell after the bell, sliding to $21.32, after closing

at $22.02 on Nasdaq.

The warning adds AMD's voice to the chorus of top technology names whose

quarterly results appear to be at risk, as a result of overall reluctance to

spend on capital, particularly for technology assets.

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On Tuesday, Apple Computer Inc. trimmed its outlook for quarterly revenues,

citing soft demand in consumer and creative markets. In addition, analysts

following International Business Machines Corp. today continued to cut their

estimates for the world's largest computer maker due to continued weak spending

on technology hardware.

"It's huge miss but it's not surprising," said Hans Mosesmann, an

analyst at Prudential Securities. "My sense was that they were going to

pre-announce." Intel on June 6 itself lowered its revenue guidance, citing

lower-than-expected demand in Europe. It said it expects second-quarter revenue

of $6.2 billion to $6.5 billion, compared with an April forecast of $6.4 billion

to $7.0 billion.

Although analysts and investors at the time had prepared themselves for a

narrowing of the revenue range toward the lower end, that Intel took the bottom

out of the previous range was a surprise, indicating that demand was even weaker

than earlier thought.

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AMD's Rivet said that chip business is particularly weak in Europe and North

America. However, he noted that AMD's flash memory business is improving and

expected to show sequential sales growth.

On a conference call with analysts, chief executive Hector Ruiz said that in

the United States, "it's a real battle" with Intel. AMD had said it

expected unit shipments of processors would fall 5 per cent to 10 per cent in

the second quarter, but they will fall more, Rivet said on the call.

He added that average selling prices for its Athlon and Duron chips will fall

in the second quarter from the first, compared with earlier expectations that

they would be flat quarter on quarter.

The company said it continues spending at record levels on research and

development in its strategic area and is executing well on its previously

reported product and technology road map schedules. AMD is expected to report

its full second-quarter financial results on July 17.

(C) Reuters Limited.

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