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AMD bumps up revenue expectations

The chipmaker raises its fourth-quarter revenue estimate to $700 million, citing a better mix of PC processors and higher seasonal demand.

Advanced Micro Devices on Thursday raised its fourth-quarter financial estimate, citing stronger than expected demand for its PC processors.

The Sunnyvale, Calif., chipmaker now expects revenue for the three-month period to total about $700 million, a 35 percent increase from its third-quarter revenue of $508 million. It originally forecast a fourth-quarter increase of about 20 percent.

Analysts have been expecting AMD to post a loss of 50 cents per share for the quarter on revenue of $612 million, according to First Call.

The additional revenue will come mainly from a better mix of PC processors and higher seasonal demand, AMD said in a statement. The optimism suggests that the company has been selling a larger number of its top-performing chips, such as Athlon XP models 2600+, 2700+ and 2800+, all of which have come out recently.

PC makers such as Hewlett-Packard and Emachines, two of AMD's main customers, said earlier this week that holiday sales got off to a good start over the Thanksgiving weekend, meeting or beating expectations in some areas. Those results, should they hold up over the duration of the holiday shopping period, also bode well for AMD, which is strongest in consumer PCs.

AMD also said that sales of flash products--nonvolatile memory used in devices such as cellular phones--so far have been strong this quarter.

But the company won't rely only on increased sales to get back to profitability. To help stem future losses, AMD has launched a restructuring and cost-saving plan that it hopes will help the company reach the break-even point by the second quarter of 2003, and save $350 million in costs during the year. The plan includes layoffs of 15 percent of AMD's staff.

AMD's announcement came ahead of a scheduled midquarter update by rival Intel.

Analysts expect Intel to narrow its revenue expectation to the upper end of its previously stated range of $6.5 to $6.9 billion for the quarter. Analysts say that Intel will likely predict revenue of about $6.8 billion for the quarter, according to reports issued Thursday morning.

"We currently estimate (Intel) revenues to be up 4.6 percent in (in the fourth quarter) to $6.8 billion and (earnings per share) of $0.13. We believe that end market demand for PCs is still poor but is showing signs of improvement," John Geraghty, an analyst with Gerard Klauer Mattison and Company, wrote in a report.

"We believe that the wireless sector has been strong during (the fourth quarter) as well. This could be beneficial to Intel since it is the largest supplier of flash-memory devices," he wrote.