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`Productivity has been driven by innovation'

Thursday, Oct 11, 2001, Page 21

"Irrespective of the world economy, people are going to want to have higher productivity to ensure they can make ... gains in their individual businesses." Jerry Sanders PHOTO: BLOOMBERG

Bloomberg: First up, let me ask you: These latest chips will do what for customers and -- more Importantly -- what will they do for AMD as a company?

Sanders: OK. Well, AMD always puts the customer first. And what we want to provide is the best computing experience you possibly can get.

So with the new Microsoft XP Windows operating system coupled with an Athlon XP processor, you'll get the best performance for office productivity, digital content creation, digital media and gaming. So we think that we've got a great product here.

Bloomberg: Since they're for sale now, any indications in terms of what kind of sales you're seeing currently, or order volume?

Sanders: Well, we think that the Athlon XP 1800+ is going to be a real winner, because it blows away the Intel 1.8GHz Pentium 4. And for the performance user, the guys who want to run their application as quickly as possible, we think we have a real winner here.

We can't say what the sales are going to be until the quarter's over. But we do know that we outsold Pentium 4 four to one in US retail in the first six months of this year. So we think that now that we've got a very competitive lineup that outperforms their highest speed products, we're going to do very, very well going forward.

Bloomberg: We have your stock chart up at this point, and over the last few months, certainly, the stock has come under pressure; investors certainly not too happy at this point.

Last week your company came out and you said third quarter sales fell a greater-than-expected 22 percent from the second quarter. And as for the EPS number, you're looking for a loss of about US$0.26 to US$0.31 a share versus analysts' forecasts for a loss of US$0.12.

All of this as you're cutting prices to compete with Intel. The question here is if this is as bad as it gets for you guys?

Sanders: Well, nobody ever knows how bad it gets. All I can say is, it's a great buying opportunity for AMD shares.

We look on the marketplace as a cyclical market. We think we've got a great product line. Certainly, the precipitous drop in demand in our flash memory business as the telecommunication's bubble burst has hurt us.

Actually, the processor business is in a fierce price war with Intel. They've got an inefficient solution with Pentium 4. In order to make this thing successful in the marketplace, they've become very aggressive on pricing and marketing programs, and it's hitting us.

I think the reason our share prices are where they are is partly because the overall tech group is way down. The SOX index which represents all semiconductor companies is way down. I don't think we're doing inherently worse than anybody else. I think that our earnings will recover when the economy recovers. And I think we're putting in place all of the right products and strategies to make that happen.

Bloomberg: There's certainly been talk of a global slowdown. There are certainly concerns with the US attacks on Afghanistan, and this is supposed to be a prolonged attack that may go on for years, according to the Bush administration. If that continues, what does that mean for your company and your earnings over the longer term?

Sanders: Well, at the end of the day, economic growth has been driven by productivity. Productivity has been driven by innovation. AMD is famous for innovation.

We are the guys that introduced the first seven generation processors. We are the guys that have introduced a number of innovations into the marketplace, including our new Athlon XP.

Our industry has always been driven by new products and innovations.

So irrespective of the world economy, people are going to want to have higher productivity to ensure they can make a, you know, gains in their individual businesses. So regardless of the world situation, there is going to be a good opportunity for AMD.

Bloomberg: Very quickly, fourth quarter, First Call has you pegged at a profit of a penny a share.

Just quickly, does that number look good at this point?

Sanders: We're not going to comment on the fourth quarter until our earnings announcement next week, so tune in.
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