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AMD to detail losses today

Advanced Micro Devices will report its first quarter financial results today, and the numbers will likely show how tough popularity can be.

AMD will report its first quarter financial results today, and the numbers will likely show how tough popularity can be.

Despite a number of recent high profile wins with major manufacturers--including a deal recently with Compaq to include K6-2 chips in Prosignia business desktops in Germany--AMD is expected to report a loss for the quarter today.

AMD is expected to report a loss of around 52 cents a share and $630 million in revenue, and many expect the losses to be larger. Mark Edelstone, of Morgan Stanley Dean Witter, has predicted a loss of 65 cents per share for AMD.

Last week, Sunnyvale, California-based AMD said that it shipped approximately 4.3 million processors during the quarter, well below company predictions that it would sell close to 5.5 million and below the 5 million-plus processors it sold in the final quarter of 1998.

To compound matters, AMD said that the average selling price for its processors dipped to $78. Earlier in the quarter, the company warned investors that it would suffer significant financial losses and lay off 300 employees--at a time when it was predicting it would report an average selling price of $89. AMD has often said that it needs to achieve an average price of $100 to turn a profit.

And yesterday, rival Intel reported better than expected earnings of $2 billion and said it gained back market share from AMD. (See related story.)

The divergent results in many ways symbolize the effects the cheap PC phenomenon is having on the industry. AMD actually gained market share in January and February, leading Intel for the first time in the U.S. retail market in those months.

Nonetheless, AMD is hurting because of relentless price drops in the consumer PC segment.

Ironically, the bad news comes at a time when AMD's relationships with large manufacturers is at an all-time high. During the quarter, the company sealed design deals with Gateway and Toshiba. So far in this quarter, Compaq has announced it will use K6-2 chips in Prosignia notebooks for small businesses.