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AMD sales up in soft market

But what about Q2?

AMD saw profits drop in the first quarter, but still managed to beat analysts' expectations.

The No.2 chipmeister, which released its Q1 figures a day after chief rival Intel, saw net income fall 34 per cent to $124.8 million, or 37 cents per diluted share, for the quarter ended April 1 2001. Analysts had expected 33 cents per share.

This compared to $189.3 million, or 55 cents per share, for Q1 2000.

Sales increased nine per cent to $1.2 billion.

PC chip volume sales topped 7.3 million, including 6.5 million seventh-generation Athlon and Duron processors. Total PC processor sales increased 17 per cent to $661 million.

"AMD had an excellent quarter in a challenging economic environment," said Jerry Sanders, AMD CEO. "The superiority of our seventh-generation PC processors enabled AMD to achieve record PC processor sales in both dollars and units even as the industry worked through inventory issues in a softening economy."

Sales of flash memory dropped ten per cent sequentially to $411 million, "reflecting a sharp decline in demand from the communications sector of the industry," Sanders said.

"Our broad product offering, excellent relationships with major customers, and long-term purchase agreements helped to mitigate the effects of this challenging environment and achieve 26 percent growth in flash memory product sales over the like period of 2000," he added, on characteristically optimistic form.

AMD expects overall sales in Q2 to be as much as 10 per cent lower than in Q1.

In January the chip giant forecast a weak Q1, saying the seasonal downturn would be made worse by an excess of PCs in the distribution channel. Unlike Intel, it was not forced to reduce forecasts for the quarter.

"AMD has enough market share to give Intel a run for its money," said Steve Allen, senior analyst with Hotovec Pomeranz & Co. Allen estimated AMD had at least 40 per cent of the market on the consumer side and ten per cent of the business market.

"AMD has been outflanking Intel for a while. They've managed to get ahead in the GigaHertz wars, and Gateway has legitimised AMD in the consumer space," said Allen.

Intel may have done a good job of keeping AMD out of corporate America so far (the sector is dominated by Intel-only Dell), but with the downturn of the economy businesses may be looking for cheaper chips, he added.

"In my opinion, AMD will probably go after the server or workstation market."

And who is tipped to jump into bed with the chipmaker? "AMD needs a strong partner. Gateway legitimised them in the desktop market, I think IBM could do it for servers," said Allen.

"2001 is going to be a really good year for AMD. And if IBM legitimises AMD for servers, 2002 and beyond will be even better," he added.

Last year, AMD saw net income of $983 million on sales up 63 per cent at $4.64 billion, which led Sanders to label 2000 the "best year in its [AMD's] history". The company also reckoned it shipped around 26.5 million units, snatching 17 per cent of overall PC processor market shipments.

Yesterday Intel said profits dropped 82 per cent in Q1 compared to the previous year. AMD this week followed Intel's lead by slashing chip prices by up to 34 per cent. ®

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