More Bad News for AMD as Production Problems Continue in Q1

Computergram International, April 8, 1999

Chipmaker, Advanced Micro Devices Inc has warned that its first- quarter was impacted by continuing production problems, saying shipments of K6-2 processors, at 4.3 million units in its just- completed first quarter, were "substantially below plan." In addition, AMD said, severe price competition, especially in chips below 400 MHz, caused average selling prices for the K6 line to slip to $78. Thus, the Sunnyvale, California-based company expects first-quarter revenues of about $630m, up from the year- ago quarter's $541m, but down significantly from the prior quarter's $789m. No guidance was given on the bottom line, where analysts surveyed by First Call were already looking for a loss of $0.56 per share.

The company had earlier said that the yield problems which impacted December production of the K6-2 - and shaved an estimated $20m off the fourth-quarter top line - had been solved, but it appears now that that wasn't entirely the case as AMD admitted the glitches "continued to take a heavy toll on production volume and mix through the first eight weeks of 1999 as the earlier material worked through the manufacturing process." The wafer starts containing the design enhancements to correct the yield issues turned out to be too late to save the first quarter, as they positively impacted unit volume and mix for only the last five weeks of the quarter.

Looking on the bright side, AMD claims that March shipments of AMD-K6-2 processors outstripped those of January and February combined, which should allow the company to meet its goal of shipping 20 to 25 million units for all of 1999. It also expects ASPs to improve this quarter, with a healthier production mix of K6-2 and K6-IIIs, as well as initial shipments of the K7 in June. Full results for the first quarter are due on April 14.