Advanced Micro Devices Inc, the No. 2 microprocessor maker, said third-quarter sales will fall about 15 percent from the previous period, resulting in a loss as it fights a price war with Intel Corp.
The company also said sales of flash-memory chips, which store information in electronic devices even when power is shut off, are expected to decline by about US$100 million, or 30 percent, from the second quarter, said spokesman John Greenagel. Last month the company forecast a total sales drop of 10 percent to 15 percent and that it was likely to report an operating loss.
Intel and Advanced Micro, the two largest makers of flash memory, are cutting prices for microprocessors to gain market share among personal computer makers such as Dell Computer Corp and Compaq Computer Corp and bolster weakening consumer demand for new PCs. Demand for flash-memory chips, used in cellular telephones and PCs, is also falling.
"Competition with Intel is what is causing the problem," said Robert Harwood, a Lafferty, Harwood & Partners analyst. "No one can make money with that going on."
Harwood, who does not own Advanced Micro shares, said the company in May was taken off its list of 35 stocks that Lafferty, Harwood recommend to clients.
In the second quarter, microprocessors accounted for about 60 percent of Advanced Micro's sales, while flash memory represented 32 percent.
The loss for the current quarter is expected to be US$0.08 a share, the average estimate of analysts surveyed by Thomson Financial/First Call. The company earned US$0.64 in the year-earlier quarter.
Advanced Micro reported second-quarter sales of US$985.3 million. In Wednesday's forecast, the company predicted sales of about US$836.5 million. The company was expected to report sales of US$853 million, the average of analysts polled by IBES International Inc.
On Monday, Intel, the largest chipmaker, slashed the price of its Pentium4 microprocessors by as much as 54 percent to revive demand and clear the way for faster models.
Last week, Advanced Micro introduced faster chips and cut prices on older products by as much as 49 percent. It said today that it expects to sell about 7.8 million microprocessors, in line with unit sales in the second quarter.
"The whole industry is in bad shape," said Harwood. "As for AMD, it will survive." The restated forecast was made by Rob Herb, Advanced Micro executive vice president, at a Wit Soundview Semiconductor Conference held in Santa Clara, California, the company said.
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