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Fri, Jan 20, 2006 - Page 12 News List

AMD's Q4 results roar past Wall Street's expectations

CHIPPING AWAY The company's stocks jumped in after-hours trade after the announcement, with many analysts saying the company is gaining on rival Intel


Advanced Micro Devices Inc (AMD), the computer chip maker, reported fourth-quarter earnings on Wednesday that far exceeded Wall Street estimates and showed that it poses a serious threat to the Intel Corp, the world's biggest chip maker.

AMD, based in Sunnyvale, California, reported sales of US$1.84 billion in the quarter, compared with US$1.26 billion in the fourth quarter of 2004.

Revenue for the quarter easily beat Wall Street's estimates of US$1.65 billion. Profits, excluding a one-time charge, were US$0.45 a share compared with analysts' expectations of US$0.27.

Shares of AMD, which closed at US$33.37, rose nearly 11 percent in after-hours trading.

The results, which were released after markets closed, came one day after Intel, long a bellwether for the technology industry, reported disappointing earnings. Intel said its sales rose only 6 percent from a year earlier.

Intel's shares fell 11 percent on Wednesday to close at US$22.60.

Some Wall Street analysts say the sharply different earnings reports represent a watershed moment for the computer-chip industry, demonstrating the momentum AMD has gained at Intel's expense.

Intel retains a considerable lead in the chip market -- holding roughly 79 percent of the market share compared with 18 percent for AMD But Intel said on Tuesday that it lost one percentage point of market share to AMD in the fourth quarter.

"Significantly stronger competition is emerging," said Tim Luke, a semiconductor sector analyst with Lehman Brothers, which has a "buy" rating on AMD's stock and a hold on Intel.

"The second-tier player is gaining traction," he said.

AMD reported US$1.35 billion in chip sales compared with US$760 million in chip sales for the fourth quarter of 2004, a 78 percent increase.

Hector Ruiz, AMD's chief executive, said his firm is beginning "2006 with more momentum and higher quality momentum than at any other time in our history."

Ruiz said that the company aims to hold 25 to 30 percent of the overall chip market by 2008 or 2009.

Industry analysts said the company's growth was attributable in part to the success of its chip technology, which they said uses less power and allows computers to process data more quickly than Intel's chip technology.

Doug Freedman, a semiconductor sector analyst with American Technology Research, who has a "buy" rating on AMD's stock and a "hold" on Intel, said that AMD no longer had to sell some of its chips at a discount to Intel's, as was the case in the past.

AMD "no longer is just playing catch-up," Freedman said.

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