AMD Cuts Q2 Sales Forecast Again

Advanced Micro Devices Inc. (AMD) cut its quarterly sales forecast for the second time in two weeks Wednesday as it suffers through weakness in the personal computer market.

Its share's fell 12 percent in pre-market U.S. trading on the Instinet electronic trading network. Other semiconductor stocks also slid following the news.

AMD, the main rival to Intel Corp. in the market for PC processors, said in a brief statement it now sees second-quarter sales of about $600 million, below its already-lowered guidance of $620 million to $700 million, provided as on June 18. Earlier sales projections ranged from $820 million to $900 million.

"There's not a lot of visibility, but even at that, two weeks ago they should have known the worst case scenario .. obviously the PC market is not very strong," said SG Cowen Securities analyst Mark Grossman. "AMD is also suffering from being at the end of its current processor family life," noting that it will launch a new line of chips at the end of this year, which puts pressure on prices of existing products.

Didier Scemama, European semiconductor analyst at ABN AMRO in London said the warning "confirms that the PC market is disastrous at the moment and that the bad news will continue."

Scemama said "it does show there is accelerating pricing pressure and that the only strength in end-demand is coming from Asia where pricing and margins are much lower."


In its June 18 statement, AMD attributed its poor sales performance to weakness in the market for PCs and also forecast a substantial second quarter operating loss.

In June, AMD said the chip business was particularly weak in Europe and North America. The company will release full second quarter results on July 17.

It is one of a number of top technology names to warn recently that quarterly results will fall below expectations because of weak technology spending.

Larger rival Intel warned in early June that it now expects second-quarter revenues of $6.2 billion to $6.5 billion, compared with a forecast in April of $6.4 billion to $7.0 billion.

Computer makers Hewlett-Packard and Apple Computer Inc have both spoken of sluggish sales.

The PC market contracted in 2001 for the first time since 1985, shrinking nearly 5 percent. Analysts had hoped that was the worst and that there would be at least a slight improvement this year.

In pre-market trading Wednesday AMD shares were off $1.05 at $7.75 from the regular closing price Tuesday of $8.80 on the New York Stock Exchange.

At that price the stock is just above its 52-week low of $7.70 but earlier in the pre-market session it had fallen to $7.50 its lowest since April 1999.