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AMD reports large loss

The chipmaker reports a loss of 88 cents per share on revenues of $631.6 million for the first quarter.

Advanced Micro Devices reported a loss of 88 cents a share--81 cents a share excluding restructuring charges--on revenues of $631.6 million for the first quarter, perversely topping analysts' dour, revised expectations.

In dollar terms, the loss amounted to $128.4 million with $15 million going to one-time charges.

The poor showing largely owes to low yields and production problems associated with the fastest K6-2 processors, declining processor prices, and high fixed-costs, the company said. AMD expects to lay off 300 employees in the near future.

The loss beat the Street's latest negative predictions, but was wider than the expectations of late last week. Last Friday, the Sunnyvale, California-based chipmaker was expected to report a loss of around 52 cents a share and $630 million in revenue, according to a consensus on First Call. That was increased in recent days to 92 cents a share.

Looking to the bright side, AMD said its forthcoming K7 processor will appear in consumer and corporate systems beginning this summer, and that IBM's popular ThinkPad notebook line will begin incorporating AMD chips, a first for Big Blue. AMD has enjoyed a series of design wins this year, stealing share in the low-cost market from rival Intel, but declining processor prices have helped prevent the company from translating those wins into profitability.

Revenues declined by 20 percent from the $788,820,000 achieved in the fourth quarter of 1998, which resulted in net income of $22,321,000, or 15 cents per share. Revenues increased by 17 percent from the $540,856,000 reported for the first quarter of 1998, which resulted in a net loss of $62,727,000, or 44 cents per share.

"The best thing that can be said about the first quarter is that it's over," said CEO Jerry Sanders in a released statement.

Yesterday, archrival Intel reported profits of $2 billion, or 57 cents a share, on lower than expected revenues of $7.1 billion.

"Our horrific financial performance in the first quarter can be attributed to three factors: yield, yield, yield," said Sanders. One of the biggest problems was a design flaw, now fixed according to the company, that hampered production of K6-2 processors, especially those running at 400 MHz or faster.

The problem is over, claimed Sanders, although pricing pressures will continue to linger. "We believe the production problems of Q1 were a one- time problem," he said.

Shipments for March outpaced both January and February combined, Sanders said hopefully, adding that K7 systems will appear in July from major computer makers in both retail and commercial markets.

Sanders further said that IBM has agreed to use AMD processors in its ThinkPad line. AMD has captured 39 percent of the U.S. retail notebook line.

An AMD spokewoman clarified that the AMD ThinkPad would be released only in Japan. However, AMD's Japanese deals are usually mirrored in the U.S. fairly quickly.