Results for Q2 steal AMD's chip thunder

The launch of AMD's latest 'Intel-killer' chip has been overshadowed by a warning that second-quarter results will be worse than predicted.

AMD has admitted it will lose $200 million for its second quarter, which comes hot on the heels of a $128 million loss for the first quarter. The loss is being blamed on a number of factors, the main two being a sharp drop in average selling prices for its K6 processor and lower unit shipments - despite the fact that the manufacturer is producing more K6s than before in terms of units and variety.

Even though AMD has said it will produce more than six million K6 units, it is unlikely that it will record sales exceeding 3.7 million, compared with higher sales of more than 5 million in the first quarter.

AMD added that a significant amount of its sales were 'turns' made through distribution, especially in Asia, and that heavy gray market activity made it unlikely that it would get the sell-through needed to hit unit targets.

The manufacturer also admitted that it was unable to retake market share as it had failed customer needs during the production shortfall in the first quarter when shipments were prioritised to AMD strategic partners.

Aggressive Celeron pricing and the liquidation of Cyrix were also cited as negative factors.

'We expect total revenue for the quarter will be less than $600 million,' said Jerry Sanders, chairman and chief executive of AMD. 'Non-processor revenue should grow by more than 10 per cent.'

He added: 'With Microsoft Windows microprocessor revenue of approximately $250 million, including several million dollars of revenue from initial production shipments of the K7 processor, we could record an operating loss in the $200 million range.

'While this will be offset by $400 million pre-tax gain on the sale of our programmable logic subsidiary Vantis, these results are a bitter disappointment to employees who have worked on the Athlon 600 processor, formerly K7.'

See Editorial, page 13.