SUNNYVALE, Calif.--Advanced Micro Devices Inc. today blamed price erosion in PC microprocessors for causing an unexpected shortfall in third-quarter revenues, which fell 22% from $985.3 million in Q2. AMD had been expecting a sequential decline of 10-to-15%.
The Sunnyvale-based chip maker said it now expects to report a pro-forma net loss of $90-to-$110 million, or $0.26-to-$0.31 per share, for the quarter, ended Sept. 30. The loss does not include one-time charges for layoffs, restructuring, and other items, which had been estimated to be between $80-to-$110 million. Last week, AMD announced it would eliminate 2,300 jobs and close down two 6-inch wafer fabs in Austin as part of a restructuring of manufacturing operations (see Sept. 25 story).
AMD said unit shipments of PC processors in the third quarter were at the same level as record volumes in the second quarter, when the company shipped over 7.7 million microprocessors to personal computer makers. The company said "very aggressive competition" caused average selling prices for PC processors to decline sharply, which "resulted in substantially lower revenues" in the third quarter.
AMD chairman and CEO W.J. (Jerry) Sanders squarely pointed the finger of blame at AMD's archrival, Intel Corp., for triggering the aggressive pricing competition and claimed it was proof that the company's Athlon and Duron processors were better than the Pentium series of MPUs.
"In an effort to make up for the performance deficiencies of computers based on its Pentium 4 processors, Intel resorted to aggressive pricing and large, cash-backed marketing programs, which had the effect of driving down ASPs on PC processors in the market segments where we compete directly," Sanders said.
As expected, AMD's flash memory sales in the third quarter declined $100 million sequentially from revenues in Q2.
While releasing Q2 results in July, AMD officials has predicted that the company could end up with an operating loss in the third quarter based on the weakness in flash memories, but the shortfall in PC processors was unexpected. At the time, chief executive officer Sanders said the company's PC processor unit shipments would be at record levels in Q3, but he would not give financial analysts a firm prediction on any increase from 7.7 million units in Q2, which was up 5% from Q1 of this year.
In July AMD said it was looking for a seasonal uptick in PC unit volumes, and a return to profitability in the fourth quarter (see July 12 story). The company today did not issue a new guidance for the fourth quarter.
Sanders claimed that AMD either held or gain market share in PC processors against Intel during the third quarter.
