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AMD beats estimates on strong sales

The chipmaker sees its fourth-quarter revenue rise 76 percent, thanks in part to higher sales of its processors and flash memory.

Advanced Micro Devices reported fourth-quarter revenue that rose 76 percent and a profit that beat analyst expectations by a whopping 8 cents per share, thanks in part to higher sales of its processors and flash memory.

The company on Tuesday reported earnings of $43 million, or 12 cents per share, including a gain of 3 cents a share, or $14 million, from adjustments of past restructuring and acquisition charges.

AMD's revenue for the quarter, which ended Dec. 28, was $1.2 billion. During the same period a year ago, the Sunnyvale, Calif., chipmaker lost $855 million, or $2.49 cents per share, on revenue of $686 million.

On average, 27 analysts surveyed by Thomson First Call, expected AMD to post a profit of 4 cents a share on revenue of $1.1 billion.

AMD finished 2003 with revenue of $3.5 billion, up 30 percent year over year from 2002, but it still suffered a net loss of $274 million, or 79 cents per share.

"Fourth-quarter profitability was driven by solid sales growth across all business lines," AMD Chief Financial Officer Robert Rivet said in a statement. "Sales increased in all regions, and we saw continued penetration in emerging markets, highlighted by record sales in China and Latin America."

This marks the first quarterly profit for AMD since the second quarter of 2001. The chipmaker has not reported an annual profit since 2000, but on a conference call with analysts, executives said the company expects to report a profit for 2004.

All told, AMD saw increased demand for its Athlon XP PC processor, the company said. It also began moving its Athlon 64 processor into the market. Hewlett-Packard began offering the Athlon 64 3200+ chip in consumer-oriented desktops, for example, during the quarter.

Revenue from AMD's computational products division, which markets its Athlon processor for PCs and its Opteron chip for servers, was $581 million, up 38 percent from a year ago.

Sequentially, PC chip revenue grew 15 percent from the third quarter, slightly faster than the 12.2 percent sequential growth that rival Intel experienced in the same period. AMD's chief executive, Hector Ruiz, said that the increase was due to higher average selling prices and deeper penetration into the customer base. In the near future, analysts will be able to determine whether AMD also gained some market share.

Since the end of the quarter, AMD has added to the Athlon 64 line, introducing an Athlon 64 3200+ model for desktops, along with three Mobile Athlon 64 processors for notebooks. The company also said it is gaining ground with its Opteron server chip.

By the second half of 2004, most of AMD's chips will come from the 64-bit family, as the company shifts to 90-nanometer manufacturing. The process is called "90-nanometer" because of the average feature size of the chips, which are smaller than those on the more-expensive 130-nanometer chips common today. "There is a significant shift toward Athlon 64," said Ruiz.

Revenue from flash memory was $566 million, a 161 percent gain from a year ago. AMD incorporates into its earnings revenue from FASL, or Fujitsu AMD Semiconductor Limited, a joint venture with Fujitsu that produces Spansion brand flash memory.

Looking forward, AMD said that because of the usual seasonal patterns, its first-quarter sales will decline slightly from the fourth quarter. However, the chipmaker said it expects flash memory sales to stay level.

Still, despite the surge, AMD is likely to begin to face pricing pressure in both microprocessors and flash memory. In the next few weeks, Intel will release Prescott, a new version of the Pentium 4, according to sources. It also plans to introduce Celeron and Xeon chips that use Prescott's basic technology. Prescott will be made on 90-nanometer processes and on 300-millimeter wafers--a combination that could cut manufacturing costs by around 30 percent. AMD won't ship 90-nanometer chips to PC makers in volume until the third quarter, and it can take eight weeks or so for manufacturers to then get these computers onto shelves.

On Wednesday, AMD will announce that the Weather Channel has switched its databases to Opteron servers built by IBM. Although the number of servers and the value of the contract will not be disclosed, AMD said the channel has paired IBM eServer 325s with Oracle's 8i software to handle database operations such as the Weather.com Web site.