SUNNYVALE, Calif.--As predicted, Advanced Micro Devices Inc. here today posted a 17% sequential decline in sales to $985.3 million for the second quarter compared to $1.19 billion in Q1. AMD recorded a net income of $17.4 million for Q2 vs. earnings of $124.8 million in the prior quarter.
But AMD also today warned that sales could drop 10-to-15% in current third quarter from Q2, if weakness continues in PC processors and the flash memory market. Flash memory is AMD's biggest problem, said W.J. (Jerry) Sanders III, chairman and chief executive officer of the company. Sanders told analysts in a conference call today that AMD was "blind-sided" by the collapse of flash prices and weak demand in the second quarter.
Based on the expected drop in total sales during the current quarter--which Sanders said could be a shortfall of more than $100 million from Q2 revenues--AMD warned it would report an operating loss in the third quarter.
Last week, AMD slashed its estimates for the second quarter due to falling prices on microprocessors and weak demand for flash memories (see July 5 story).
AMD today said it sold more than 7.7 million PC microprocessors in the second quarter, a 5% increase from 7.3 million in Q1. Unit sales of AMD's Athlon and Duron processors were both at record levels, according to the company, but average selling prices (ASPs) for personal computer MPUs declined sharply from the first quarter because of "very aggressive pricing in a weak PC market."
The company said it now believes PC unit shipment will be flat this year compared to 2000.
"While responding to aggressive competitive pricing in microprocessors depressed our revenues and earnings, we believe we continued to gain unit market share in the PC processor market during the quarter," Sanders said. "PC processor revenues declined 11% sequentially, but grew nominally over the second quarter of 2000."
AMD said a normal seasonal uptick in Q4 sales, coupled with a recovery in some of the markets for flash memory products, should enable the company to increase revenues during the fourth quarter and return to "solid profitability."
During today's conference call, Sanders said flash memory revenues decline was twice as much as expected in the second quarter. The CEO said AMD was premature in thinking that the second quarter was the trough of the current downturn, but now the Sunnyvale company expects a recovery will improve the memory segment by the fourth quarter.
--J. Robert Lineback
