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AMD joins parade of warnings

Advanced Micro Devices (NYSE: AMD) couldn't avoid the PC downturn.

After market close Monday, the maker of PC processors said it now expects to earn 50 to 60 cents per share in the fourth quarter. First Call's survey of 16 analysts had been predicting a profit of 68 cents per share for the December quarter.

Shares of AMD traded at 17 in afterhours activity on the Island electronic communications network, following the warning. AMD rose 1.25 to 17.3125 in Monday's regular trading, ahead of the preannouncement.

Fourth quarter sales will be flat or just slightly higher compared to third quarter revenue of $1.2 billion, the chipmaker said. AMD expects to chip shipments will be "nominally" above third quarter volume of 6.8 million units.

The company previously expected revenue to increase sequentially in the high single digits, on a percentage basis. AMD originally set a unit shipment target of 8 million to 9 million chips for the fourth quarter.

AMD's preannouncement comes on the heels of a profit warning from rival Intel (Nasdaq: INTC). Many chip industry observers have been expecting processor companies to lower their fourth quarter financial targets, following warnings from several PC vendors, including Gateway (NYSE: GTW) and Micron Electronics (Nasdaq: MUEI).

AMD joined the chorus of companies blaming their financial disappointment on the widely-reported slowdown in consumer demand for personal computers. Although AMD has claimed market share gains from Intel in recent quarters, AMD relies more heavily on the consumer PC market than its larger competitor.

But AMD characterized the PC slowdown as a momentary setback, rather than a long-term indicator.

"While the slowdown in demand for PCs has been attributed variously to excess channel inventory, a slowing economy, or buyer apathy, we believe it is temporary," said Jerry Sanders, AMD's chairman and CEO.

Sales remain strong for AMD's high-end Athlon processors, the company said. AMD still expects to sell all Athlons produced in the fourth quarter.

The company said its flash memory business remains healthy, with expected fourth quarter flash sales to "somewhat exceed" earlier expectations.

Despite the warning, AMD shares may not necessarily fall much on Tuesday. AMD stock already fell near its 52-week low, and it should be noted that Intel stock actually rose following last week's report.

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• AMD hurdles 3Q forecasts, sees strong 4Q>