AMD Reports Third Quarter Results
Cites Improving Flash Outlook, Weak PC Market Demand, Significant Reduction in Supply Chain Inventory
Sunnyvale, CA --
AMD (NYSE:AMD) today reported sales of $508,227,000 and a net loss of $254,171,000, for the quarter ended September 29, 2002. The net loss amounted to $0.74 per share, presented in accordance with generally accepted accounting principles (GAAP).
Third quarter sales declined by 34 percent from the third quarter of 2001 and by 15 percent from the second quarter of 2002. In the third quarter of 2001, AMD reported total sales of $765,870,000 and a net loss of $186,929,000, or $0.54 per share. Excluding the effects of restructuring and other special charges 1
, the 2001 third quarter loss was $97,424,000, or $0.28 per share. In the second quarter of 2002, AMD reported sales of $600,299,000 and a net loss of $184,938,000, or $0.54 per share.
For the first nine months of 2002, sales declined by 32 percent from the first nine months of 2001. AMD reported sales for the first nine months of 2002 of $2,010,599,000 and a net loss of $448,272,000 or $1.31 per share. For the first nine months of 2001, AMD reported sales of $2,939,881,000 and a net loss of $44,739,000, or $0.14 per share. Excluding the effects of restructuring and other special charges1
, net income for the first nine months of 2001 was $44,766,000, or $0.13 per diluted share.
“The sequential decline in third quarter sales was primarily due to the aggressive actions we took in the PC supply chain to align our product mix with current customer and end-user demand, which has been less than we forecasted,” said Robert J. Rivet, AMD’s chief financial officer. “We took more aggressive action in the third quarter than in the second quarter, which masked the progress that AMD is achieving in the marketplace. The sell-through, that is, actual consumption of AMD microprocessors, was higher in the third quarter than in the second quarter. While AMD’s unit sales for desktop were hard hit by our actions, we believe we held market share in mobile unit sales and made substantial progress in server unit sales, increasing unit shipments by 17 percent. The improved alignment of inventory in the supply chain and the increased availability of the highest performing AMD Athlon XP™ processors on 130-nanometer technology should enable AMD and our customers to take advantage of the anticipated fourth quarter seasonal improvement in demand.
“Flash memory product sales grew in the third quarter based on the strength of the high-end mobile phone market, as bit demand for AMD Flash memory continued to increase.
“We are accelerating our strategy to reset our business model and lower our corporate breakeven point. We will begin to implement additional and aggressive actions in the fourth quarter that are expected to significantly reduce our quarterly breakeven point beginning in the first quarter of 2003.”
PC processor sales of $262 million for the quarter declined by 31 percent from the $380 million reported in the second quarter of 2002. This decline was driven by a drop in both units and dollars of microprocessors for desktop applications. AMD believes it held share in the mobile segment and gained share in the server segment.
Conversion of AMD Athlon XP processors on 130-nanometer technology is now complete, and the Company’s Fab 30 plant in Dresden, Germany is now producing 100 percent of its wafer-outs on 130-nanometer process technology. AMD plans to begin production shipments of Hammer-based processors in the mid first half of 2003.
AMD memory sales of $189 million were up 8 percent from the $175 million in the second quarter of 2002. For the second quarter in a row, AMD Flash memory bit shipments reached an all-time record level. In July, AMD began production shipments of AMD MirrorBit™ Flash memory products. AMD MirrorBit architecture is a breakthrough technology that allows Flash memory devices to hold twice as much data as standard NOR Flash devices without compromising device endurance, performance or reliability.
ADDITIONAL HIGHLIGHTS OF THE QUARTER
In July, Hewlett-Packard Company and Acer Europe unveiled powerful systems based on the new mobile AMD Athlon XP processor 1800+. With QuantiSpeed™ architecture and PowerNow™ technology, the mobile AMD Athlon XP processor gives business and home consumers a dynamic power management tool for performance on demand and enables a cooler, quieter notebook PC.
In July, top tool vendors Etnus, MigraTEC, Numerical Algorithms Group (NAG), and STMicroelectronics announced support for upcoming AMD Athlon and AMD Opteron™ processors based on Hammer technology. Tools developed will help hardware and software vendors easily deliver applications and systems to support AMD processors based on Hammer technology.
Also in July, AMD announced the 64-bit enablement of IBM’s DB2 database software for AMD Opteron processors based on Hammer technology. The enterprise-class database solution features a DB2 database on a SuSE Linux operating system, and was successfully enabled to support x86-64 technology in two days.
- In August, AMD announced immediate availability of a 64 Megabit Flash memory device that supports industry-leading levels of data throughput while consuming significantly less power than competing products in all modes, including up to 95 percent less power in standby mode.
- In August, Red Hat, Inc. and AMD announced that Red Hat will offer global support for AMD Athlon and AMD Opteron processors based on Hammer technology in Red Hat Linux Advanced Server, and future enterprise Linux offerings from Red Hat. Red Hat will provide native 64-bit support for processors based on AMD’s x86-64 technology, while providing support for existing 32-bit Linux-based applications.
- In August, the new Compaq D315 Business Desktop PC from Hewlett-Packard Company followed the successful worldwide introduction of the HP N115 Evo business notebook PC earlier this year and continued to expand customer choice for powerful and reliable business computing solutions powered by AMD processors.
- Also in August, AMD announced the world’s highest-performing processor for desktop PCs, the AMD Athlon XP processor 2600+, and the AMD Athlon XP 2400+.
- In September, AMD announced it had fabricated the smallest double gate transistors reported to-date. These transistors, measuring ten nanometers, are six times smaller than the smallest transistors then in production. This research breakthrough could foster the placement of a billion transistors on the same size chip that currently holds 100 million transistors, enabling a vastly richer computing experience.
- Also in September, Hewlett-Packard Company, Fujitsu Siemens Computers, and Packard Bell (the consumer division of NEC Computers International) said they will begin offering later this year systems based on the mobile AMD Athlon XP processor 1900+.
AMD’s outlook statements are based on current expectations. The following statements are forward-looking, and actual results could differ materially. Economic and industry conditions remain uncertain, and continue to make it particularly difficult to forecast product demand. The company’s current outlook for the fourth quarter is based on the following projections:
AMD Files 10-Q/A
- Based on increased forecasted demand for high-end cell phones and AMD Flash memory products, the company expects a significant increase in sales of Flash memory devices.
- Based on anticipated seasonal patterns and the benefits of a better-balanced inventory in the supply chain, and an improved product mix, the company expects increased PC processor sales.
- Based on forecasted improved Flash and PC processor sales, AMD expects fourth quarter sales to improve significantly.
- Based on expected overall sales improvement, AMD expects to significantly reduce its operating loss in the fourth quarter compared to the third quarter.
In AMD’s unaudited consolidated balance sheet as of June 30, 2002 reported on Form 10-Q quarterly report for the period ended June 30, 2002, AMD reflected Prepaid Expenses and Other Current Assets of $166,963,000 and Accounts Payable of $258,641,000.
The correct balances, as of June 30, 2002, were: Prepaid Expenses and Other Current Assets - $264,663,000 and Accounts Payable - $356,341,000. These revised balances do not affect previously reported stockholders’ equity or working capital as of June 30, 2002 and do not affect AMD’s statement of operations for the periods ended June 30, 2002 or net cash provided by operating activities for the six month period ended June 30, 2002.
AMD will hold a conference call for the financial community at 2:30 PM Pacific Time today to discuss third quarter financial results. AMD will provide a real-time audio broadcast of the teleconference on the Investor Relations page of its web site at http://www.amd.com
. The web-cast will be available for two weeks after the conference call.
This release contains forward-looking statements, which are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Investors are cautioned that forward-looking statements in this release involve risks and uncertainty that could cause actual results to differ materially from current expectations. Risks include the possibility that global business and economic conditions will worsen resulting in lower than currently expected sales in the fourth quarter of 2002; that Intel Corporation pricing, marketing programs, product bundling, new product introductions or other activities targeting the company's processor business will prevent attainment of the company's current PC processor sales plans; that demand for personal computers and, in turn, demand for the company's PC processors will be lower than currently expected; that the sales of PC processors will not follow seasonal patterns and increase from third quarter levels; that the company will not continue to be successful in ramping production of the company's AMD Athlon processors on 130-nanometer technology in Fab 30 in Dresden, Germany, on the current schedule; that demand for the company's Flash memory products will be lower than currently expected, particularly in the high-end cellular telephone sector; that the company will not achieve sequential growth in sales of Flash memory devices; and that the company may not achieve its current product and technology introduction schedules. We urge investors to review in detail the risks and uncertainties in the company's Securities and Exchange Commission filings, including but not limited to the report on Form 10-K for the year ended December 30, 2001 and the report on Form 10-Q for the quarter ended June 30, 2002.
AMD is a global supplier of integrated circuits for the personal and networked computer and communications markets with manufacturing facilities in the United States, Europe, Japan, and Asia. AMD, a Fortune 500 and Standard & Poor’s 500 company, produces microprocessors, Flash memory devices, and support circuitry for communications and networking applications. Founded in 1969 and based in Sunnyvale, California, AMD had revenues of $3.9 billion in 2001. (NYSE: AMD).
Third quarter and the first nine months of 2001 special charges included restructuring and other special charges of $89.3 million, impaired investments of $22.0 million, and additional inventory provisions of $6.9 million.