Advanced Micro Devices Inc, the giant computer chip maker from Sunnyvale, California, has revealed a loss making second quarter heavy with the sickly symptoms suffered by its colleagues across the semiconductor industry. Second quarter net losses rose to $65m, double analysts’ expectations, against losses last year of $63m on revenues which fell 11% to $527m. As well as falling year on year, sales also fell by 2.6% sequentially. Asked about prospects for the second half of the year, AMD’s chief executive Jerry Sanders said, We have very little visibility…market demand for products generally, with the exception of the K6, is as weak as ever I’ve seen it. Sanders was referring to AMD’s K6(R) microprocessors, a family of chips designed to compete directly with Intel Corp’s Pentium chips for the Windows PC market, but offered at a 25% price discount. AMD said that sales of the K6 family rose 35% in the quarter, but this wasn’t sufficient to prop up declining revenues from AMD’s other divisions, its memory and communications chips. Sanders estimates that his company has to hit sales of at least $650m a quarter to break even, leaving it currently over $100m shy. And with little prospect of increasing revenues from memory and communications chips, Sanders is gambling heavily on a huge rise in K6 microprocessor sales over the next two quarters, bringing it head to head with Intel. The most important announcement in our long history as a Windows compatible microprocessor supplier was the May 28th announcement of the K6-2 with 3Dnow!, said Sanders. For the first time, AMD has chosen not to follow Intel’s lead, but to offer an alternative with 3Dnow! to rival Intel’s highly publicized MMX technology. Sanders claims that Windows 98 has re- ignited demand for PCs in the retail channel, and AMD wants to cash in, because sales of the K6 are the only chance it has of returning to profit in the short term. AMD shipped a claimed 2.67 million K6 chips in the second quarter, with the internal target set for a rapid escalation to 12 million units this year. Sanders also claimed that AMD would meet volume delivery of 350MHz chips in the next quarter, rising to 400MHz in the fourth, although he was questioned by analysts about the viability of this target.
