AMD beats estimates

Advanced Micro Devices (AMD), which has had three consecutive losing quarters, today beat Wall Street's estimates by reporting first-quarter profits, in part due to its new multimedia chip.

AMD reported net income of nearly $13 million, or 9 cents a share, for the period ending March 30, compared with profits of $25.3 million, or 18 cents a share, a year ago.

Wall Street anticipated a loss of 2 cents a share, according to First Call.

The company reported a slight increase in first quarter revenue to $552 million, compared with $544.2 million a year earlier.

"Recovering strength in all sectors of our business produced the sales growth necessary for AMD to return to modest profitability even before volume shipments of AMD-K6 MMX processors," Chairman and Chief Executive W.J. Sanders III said in a statement.

He added revenue growth was driven by flash memories, Windows compatible microprocessors, and programmable logic devices from its Vantis division. Meanwhile, AMD's book-to-bill ratio, the gauge of future business, was greater than 1-to-1. A 1-1 ratio means that for every $100 dollars of orders coming in the door, the same volume is being shipped.

AMD also expects the second quarter to bring further improvement.

The chipmaker, which began volume production of its K6 processor with multimedia extensions in the first quarter, expects to reap the benefits when it reports its second-quarter results.

The K6 is AMD's next-generation processor that competes with Intel's (INTC) P6 processors, including the Pentium Pro and the upcoming Klamath processor.

Intel's Klamath is expected to rollout in May or June. The Klamath will use Intel's MMX technology, which speeds up multimedia functions such as graphics, sound, and communications. The Pentium Pro does not use MMX technology.

The quarter has been shadowed by legal battles over the meaning and use of MMX.

The companies have yet to see eye-to-eye over the MMX term, but courts have ruled both for and against Intel's battle to gain a trademark over the acronym for multimedia extensions.

In two important trademark cases, Intel has settled its suit with Cyrix (CYRX) but has failed to obtain a court order stopping AMD from using "MMX" in its advertising and promotional materials.

An AMD spokesman said the ruling reached on April 1 is a victory for customers because there will be competition in microprocessors.

"If Intel was granted a patent, it would make it more difficult for customers to understand that our chip executes the MMX extensions--that is what the customer needs to know in the long run," said John Greenagel.

AMD started to pull out of a slump last November when the company started limited shipments of its K6 processor during the fourth quarter. And the chipmaker announced a smaller-than-expected fourth-quarter loss of 15 cents a share thanks to accelerated shipments of its K5 microprocessors.

But at least one analyst questioned whether AMD has what it takes to successfully compete with Intel.

"AMD will not take away market share from Intel because the industry still has a lack of confidence in AMD's ability to bring upgrades," said UBS Securities analyst Charles Boucher.

In February, AMD began shipping removable flash memory cards for consumer electronics such as digital cameras, audio recorders, smart cellular phones, and pocket PCs. The cards are based on the Miniature Card Implementers Forum (MCIF) standard, which ensures interoperability between handheld devices and the PC.

(Intel is an investor in CNET: The Computer Network.)