AMD Reported Another Loss

by Anton Shilov
07/29/2003 | 04:53 AM

A news-story we did not publish last week is definitely a coverage of AMD financial results for its recent quarter. We will keep an eye on this kind of statements from AMD and there will be no delays in future.

The company’s sales in its fiscal Q2 achieved $645 million on a net loss of $140 million, or $0.40 per share. Second quarter sales increased by 7% from the second quarter of 2002 and decreased by 10% from the first quarter of 2003. In the second quarter of 2002, AMD reported total sales of $600 million and a net loss of $185 million, or $0.54 per share. In the first quarter of 2003, AMD reported sales of $715 million and a net loss of $146 million, or $0.42 per share.

“We are pleased we lowered our operating breakeven point to below $800 million and continued to realize improvements that better position us for growth and a return to profitability,” said Robert J. Rivet, chief financial officer. “Despite the effects of the SARS epidemic and weaker than anticipated channel sales in some of our international markets, we reduced our net loss by 24% and increased our gross margin as a result of year-on-year sales growth and effective cost management. Quarter-on-quarter, in spite of a sales decline of $69 million, we still managed to reduce our loss and improve our gross margin.

AMD’s second quarter operating costs of $769 million compared favorably to $897 million in the second quarter of 2002 and to $840 million in the first quarter of 2003. The Sunnyvale, California-based semiconductor firm increased its positive EBITDA quarter-to-quarter and ended the second quarter with a cash balance of $739 million. In addition, AMD extended its $200 million revolving line of credit, currently untapped, for four years.

Business Overview

PC processor sales of $402 million were up 6 percent year-on-year and decreased by 14% from the $468 million reported in the first quarter of 2003. Increased second quarter sales to Tier One OEM customer base were more than off-set by a decline in the desktop segment, especially in the Asian and European market geographies, where sales were off significantly.

AMD memory sales of $211 million for the second quarter were down slightly from the $218 million reported in the first quarter of 2003. Year-over-year, memory sales were up 20% compared to the $175 million in the second quarter of 2002. While the SARS epidemic caused a decline in demand for cellular handsets and resulted in significantly lower memory sales for AMD in Asia, this decline was almost entirely off-set by increased memory sales in North America and Europe. The Number Two CPU maker continued to gain share in the high-end cellular handset market and maintained its leadership position in high density Flash. Bit shipments grew for the seventh consecutive quarter, once again to record levels. AMD’s average Flash density nearly doubled compared to the second quarter of 2002.

Current Outlook:

AMD believes that sales in the third quarter will increase based on the following:

• Third quarter processor sales are expected to increase based on normal industry seasonality along with AMD’s enhanced product position based on increased shipments of AMD Opteron processors and initial shipments of AMD Athlon 64 processors.
• Flash memory sales are expected to increase based on continued market share gains in the high-end cellular handset market and the recovery of the Asian markets.
• The consolidation of FASL LLC operations commencing June 30, 2003 is expected to increase Flash memory sales by approximately $180 million.
• With the consolidation of FASL LLC’s Flash operations, the company anticipates its third quarter operating costs to be approximately $1 billion.