If

Advanced Micro Devices

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is any indication, the second quarter is going to be even more dismal for flash-memory makers than Wall Street expected.

AMD said Thursday night that

declining prices and weak demand for flash conspired with poor microprocessor prices to slash sales and earnings. The report calls into question just how poorly other flash makers, such as

Atmel

(ATML)

,

STMicroelectronics

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and

Silicon Storage

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, might have fared in the second quarter.

Indeed, among flash-chip companies, only storage product maker

SanDisk

(SNDK)

hasn't warned of a shortfall. That's not saying much, though: It already expects to lose 5 cents a share this quarter.

Flash stocks dropped 6% to 8% in wake of the sharp selloff in AMD, which plunged $7.65, or 27%, to $20.99. STMicroelectronics dropped $2.21 to $29.12, Atmel slid $1.04 to $11.51, Silicon Storage fell 69 cents to $8.55 and SanDisk lost $1.56 to $24.45.

In the next few weeks, these companies will issue full second-quarter results that will show how not only weaker unit sales, but lower prices, have hurt their bottom lines. The flash market brought in about $10.6 billion in revenue in 2000, up 133% from the previous year, according to Scottsdale, Ariz., research group

IC Insights

. But the supply shortages that had fueled that growth disappeared as demand for cell phones, wireless infrastructure, personal computers and consumer electronics has slowed this year. That has led to sharply lower prices in recent months.

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"The first cycle of the downturn, or the first phase of the downturn, is unit-related, and the second phase is pricing-related," says Ashkok Kumar, an analyst at

U.S. Bancorp Piper Jaffray

. "So what we're seeing right now is that even though the downward momentum of unit demand has moderated, pricing pressure continues."

The Plunge

For instance, according to research from Boston brokerage

Fechtor Detwiler

, which tracks flash prices at distributors and brokers, at the beginning of June a 16-megabyte unit of flash memory was selling for $4. That's down from $7.50 in May, $13 in January and $16 last July.

Most of the decline in demand has come from the cell-phone business, which is the largest consumer of flash products, according to Drew Peck, analyst at

SG Cowen

. And indeed, looking back, warnings from companies like

Nokia

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pushed down the stock of some flash makers like STMicroelectronics earlier this year. That's with good reason.

"Certainly flash memory looked dismal during the last quarter. In fact, flash memory was off something like 40% sequentially in the quarter," Peck says. "

Intel

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and AMD dominate the market and dictate pricing, so if the market is down 40%, you can be sure they'll be down 40% as well."

STMicroelectronics and Atmel aren't as large as Intel or AMD, but they will have been pressured as well, Peck says. A player like SanDisk, meanwhile, he says, could be somewhat insulated from the pricing decline because it takes flash chips and repackages them as pricier flash cards. And Intel may be the largest maker of flash memory, but flash is such a smaller percentage of revenue that in early June, Intel said revenue and margins were still on track.

What They've Said

STMicro warned analysts on June 14 to expect revenue in the range of $1.55 billion to $1.60 billion, down at least 16% from the $1.9 billion it posted last quarter. Analysts say the company will bring in earnings of 15 cents a share,

Thomson Financial/First Call

says.

Atmel, which makes flash and other semiconductors, on May 15 warned that revenue in the second quarter would fall 10% to 15% from the $525.9 million it booked in the first quarter, or to $447 million to $473 million. Analysts expect the company to earn 6 cents a share, according to Thomson Financial/First Call.

Silicon Storage, which makes flash and flash products, said on June 13 that revenue would be $60 million to $68 million in the second quarter, down from $86.3 million in the first quarter. It also predicted it would earn up to 3 cents a share; analysts see it earning 1 cent a share.

SanDisk, meanwhile, last guided analysts back in April, saying that second-quarter revenue would be flat from the first quarter's $101 million. It also forecast loss of 5 cents a share.

But if AMD is any indication, those numbers may not be low enough.