Bright earnings expected from AMD amid chip onslaught
Advanced Micro Devices is expected to accomplish a feat that has eluded it for more than a year--a second consecutive quarter of profits--as competitor Intel prepares to release new chips.
The Sunnyvale, Calif.-based chipmaker is expected to report earnings of 52 cents per share for the quarter, according to a consensus estimate on First Call. The estimates have continued to climb, as last week the consensus number was 48 cents per share. Last quarter, AMD reported earnings of 43 cents a share.
A second profitable quarter, based on sales of the Athlon processor and flash memory, would mark a serious departure from the past for AMD.
Last year, AMD revealed a massive loss of 81 cents a share for the first quarter, caused primarily by its processor price war with Intel. AMD did report a profit at the end of 1998, but continued sparring with its chip rival decimated earnings for the next few quarters. Although AMD has not reported a profit for a fiscal year since 1995, many expect that could change this year.
AMD is scheduled to announce earnings after the market closes today.
Earlier this month, AMD surprised investors when it said it expects to report record sales in excess of $1 billion, or about 10 percent more than last quarter. This news is a reversal of a seasonal trend in the chip market, when sales generally decline after the end of the year.
A substantial portion of AMD's revenue and profits come from sales of its touted Athlon processor for high-performance PCs. The chip has met with strong acceptance among computer aficionados and PC manufacturers. Later in the second quarter, the company will release a new version of the chip, code-named Spitfire, for the budget PC segment.
A high performance model called "Thunderbird" will also appear
mid-year. Thunderbird is expected to run at 1.25 GHz at launch,
according to sources close to AMD.
The company is also coming out with a more advanced version of its K6-2 chip, called the K6-2+, for notebooks this month. Hewlett-Packard is slated to come out with a notebook using the chip on April 17.
Still, even AMD's supporters warn that it cannot rest on its accomplishments. Although competitor Intel was hampered by supply problems earlier in the year, the company is said to be digging out from a shortage of Pentium IIIs. This situation is expected to become more clear once Intel reports its earnings on April 18. Further, new Celerons and a 700-MHz Pentium III for notebooks are expected to hit shelves later this month.
Intel is preparing to release a chip, code-named Willamette, toward the third quarter. When coupled with Rambus memory, Willamette will surpass Thunderbird in performance, according to some industry observers.
"It will be like there are two classes of machines," Peter Glaskowsky, an analyst at MicroDesign Resources, said earlier this month, "There will be no comparison."