PC-Related Chips Power AMD Growth

AMD has the post-holiday PC purchase blitz to thank for its recent financial success.

As part of its fourth quarter and end-of-year financial reporting, the Sunnyvale, Calif.-based semiconductor maker Tuesday blew out financial analysts’ 3 cent per share estimates with 9 cent per share earnings, as revenues of $1.21 billion topped $1.08 billion forecasts. In the third quarter of 2003, AMD reported sales of $954 million and a net loss of $31 million.

“This past quarter has proven that we can build on the sustainable part of our promise of last year,” AMD CEO Hector Ruiz said during a conference call. “The fact that we were very close to making money is proof of our growth.”

Ruiz said that promise included shipping a line of 64-bit processors that could also run 32-bit apps. The company first introduced its Opteron processor for servers and workstations in April. Then in September, AMD debuted its Athlon 64 for desktops and notebooks.

Like rival Intel , which also saw better than expected quarterly financial results, AMD saw an increased demand for its Athlon XP chips as well as its Flash memory processors.

“Fourth quarter profitability was driven by solid sales growth across all business lines,” AMD CFO Bob Rivet said. “Sales increased in all regions, and we saw continued penetration in emerging markets, highlighted by record sales in China and Latin America.”

During the quarter, AMD said there was especially strong demand for its AMD Athlon XP desktop processor line and growing momentum for its AMD64 chips. The company’s Computation Products Group (CPG), which includes the Opteron and Athlon lines saw sales of $581 million, which is 38 percent higher than 2002 and 15 percent better than the previous quarter. Much of the group’s $63 million operating income was due to a better price tag and higher unit volumes, the company said.

Partners sure seem to be betting on AMD’s chips. IBM, HP and Fujitsu-Siemens began selling AMD64 processor-based systems in the fourth quarter and Sun Microsystems will deliver AMD Opteron processor-based enterprise servers in the first half of this year.

Customers are also asking for more AMD Athlon 64 and AMD Opteron processors, the company said. AMD said in the last three months it gained new global customers such as Daimler Chrysler, QUALCOMM, Pirelli and Bristol-Myers Squibb.

The company also said its Spansion Flash memory brand increased in market share in the growing NOR Flash market.

“We increased sales to our existing customer base and added new wireless and consumer electronics customers, especially in emerging markets,” Rivet said. “MirrorBit technology continues to earn widespread acceptance as an emerging industry standard, and was our fastest growing memory product line.”

Spansion is the branded memory product from the FASL LLC partnership between AMD and Fujitsu. AMD said its Flash memory sales hit $566 million in the fourth quarter due to gains in the wireless and consumer electronics segments.

But for the next three months, AMD said sales within its Flash memory business should remain flat reflecting the usual seasonal dip in sales. Likewise, the company is expecting its processor business to remain on par with the rest of the industry and is anticipating aggregate sales to be down slightly.

The estimates are a little timid considering what industry trade groups
have been saying in the last few months. The Semiconductor Industry Association (SIA)
is projecting a banner year for 2004 with overall industry revenues to increase by 19.4 percent to $194.6 billion. As part of its forecast for 2003-2006 the SIA said a slight market correction of only 5.8 percent growth to $206.0 billion in sales is anticipated for 2005. The trade group is only anticipating a short correction, however, as it predicts the numbers should
start to swing back to 6.6 percent to $219.6 billion in 2006.

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