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AMD Losses Reflect Weakened PC Market

Despite a revenue drop of 21%, AMD's top brass insist the market is showing signs of stabilizing.

Advanced Micro Devices on Tuesday reported widening losses in the first quarter and a revenue drop of 21% as sales of microprocessors were hurt by a weak PC market in the global economic recession.

AMD's financial results were the first since the company spun off its manufacturing operations to a joint venture with Advanced Technology Investment Co., formed by the Abu Dhabi government. AMD consolidated the operating results of the GlobalFoundries company formed with ATIC in its results as of March 2.

Dirk Meyer, president and chief executive of AMD, told financial analysts during a teleconference that the company saw continued "global contraction" in the PC market, which resulted in "sluggish" demand for AMD's products. However, the CEO said the market had showed signs of stabilizing.

Nevertheless, AMD did not offer specific guidance for the second quarter, saying only that it expected sales to fall. "Considering current macroeconomic conditions, limited visibility, and historical seasonal patterns, AMD expects its product company (without GlobalFoundries operating results) revenue to be down for the second quarter," the company said in a statement.

AMD reported a net loss in the first quarter of $416 million, or 66 cents per share, compared with $351 million for the same period a year ago. Revenue was $1.177 billion in the first quarter, compared to revenue of $1.487 billion a year ago. Gross margin was 43% versus 42% a year ago.

AMD's latest results were dramatically better than the fourth quarter of last year when the company reported a $1.4 billion loss related to the 2006 acquisition of graphics chip company ATI Technologies and a write-down of unsold inventory. Revenue fell 33% from fourth quarter of 2007 to $1.2 billion.

In February, AMD stockholders approved the spin-off of the chipmaker's manufacturing operations, which is expected to reduce costs by focusing AMD's efforts on designing rather than making microprocessors. AMD has suffered from a string of quarterly losses resulting from tougher competition from its larger rival Intel and more recently the economic downturn.

Intel this month reported double-digit drops in revenue and profits in the first quarter, but said it believed PC sales had "bottomed out" and that the industry was returning to more normal seasonal patterns.


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