AMD Share Price Jumps On 4Q Revenue HopesAMD Share Price Jumps On 4Q Revenue Hopes

Advanced Micro Devices Inc.'s stock price rose more than 20% Thursday, one day after the chipmaker reported a bigger-than-expected third-quarter loss but said it expects sharply higher sales in the fourth quarter.

AMD reported a loss of $254.2 million for the third quarter of 2002, ended Sept. 29, up from the $186.9 million loss it reported in the same quarter a year earlier. Revenue dropped 34%, from $765.9 million for the third quarter of 2001 to $508.2 million for the most recent quarter.

AMD attributed the decline in sales to weak demand for PCs, but indicated it expects fourth-quarter sales to grow as much as 20% compared with the third quarter and losses to decrease as the company realigns its business to better manage decreases in demand.

Much of this realignment involves improving supply-chain processes and increasing production of its Athlon XP processors on 130-nanometer technology. PC-processor sales of $262 million for the third quarter were down 31% from the $380 million in the previous quarter. This decline was driven by a drop in both units and prices for microprocessors for desktop applications.

AMD's flash-memory product sales grew to $189 million in the third quarter because of strong sales in the high-end mobile phone market, and it projected a sharp gain in the fourth quarter. The company said it held market share in mobile-unit sales and made progress in server-unit sales, increasing unit shipments by 17%.

AMD's financial performance comes on the heels of Intel's flat year-to-year performance, reported earlier this week. The success of both companies depends on their ability innovate while cutting costs, says Russ Craig, Aberdeen Group's research director for semiconductors. "AMD's problem in particular is that its ability to stay in the microprocessor marketplace is predicated on next-generation semiconductor manufacturing process design, which is extremely expensive." It can cost as much as $2.5 billion to build a next-generation chip-manufacturing facility. But Craig says AMD will stay in the market, most likely by looking for a partner to share the costs of investing in new technology and manufacturing facilities.