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AMD's chip sales sink further

Chipmaker Advanced Micro Devices says it will miss third-quarter targets with sales of $500 million and will report a "substantial operating loss."

Chipmaker Advanced Micro Devices said Wednesday that third-quarter sales will come to approximately $500 million, less than expected, and the company will report a "substantial operating loss" for the quarter.

2002 will not be looked back on with fondness by the Sunnyvale, Calif.-based chipmaker. AMD earlier predicted that sales for the third quarter would improve modestly from the $600 million achieved in the second quarter.

That second-quarter figure, though, was a major disappointment. AMD initially predicted it would rack up $820 million to $900 million in revenue for the quarter, but went on to cut expectations twice.

The third quarter will mark AMD's fifth-straight quarter of losses. Profits are not expected to return until next year.

In the last few months, the company has had difficulty in releasing new chips in volume. The Athlon XP 2400+, originally due in the second quarter, has only begun to appear in small volumes on the market. PCs featuring two new chips, the Athlon XP 2700+ and 2800+, won't come out until late November. "Clawhammer," a hotly anticipated chip for desktops, has been delayed until late in the first quarter or early in the second quarter.

"While our flash memory business is improving and showed sequential sales growth for the second consecutive quarter, the weakness in the personal computer market continues to impact AMD," said Robert J. Rivet, the company's chief financial officer.

AMD, of course, is not the only chipmaker feeling the pinch. On Tuesday, Britain's ARM Holdings, which designs chips for cell phones and handhelds, said that both revenue and earnings would fall short of expectations.

Intel, meanwhile, said sales for the quarter would come in at around $6.6 billion, slightly lower than anticipated.

PC sales have also been off. Dell Computer, which has been nabbing market share from rivals, is one of the few companies to announce that current sales are better than expected.

On an optimistic note, however, representatives at Dell on Tuesday reiterated that they are seriously examining Opteron, an AMD server chip set for release around the middle of next year. Dell has been testing the processor since July and is currently debating whether to adopt it, or Intel's Itanium 2, for high-end servers that need 64-bit chips. Dell currently does not sell Itanium 2 machines and has never used an AMD processor.

"You should expect that we will have a better sense of what will do in 64-bit computing by the end of the year," a Dell representative said.

AMD will report earnings Oct. 16.