AMD Guidance Is Gone in a Flash

The chipmaker says weakness in its flagship business will hurt third-quarter revenue.
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Updated from Oct. 4

Advanced Micro Devices

(AMD) - Get Report

became the latest chipmaker to reduce its outlook for the third quarter, saying sequential sales would be slightly lower due to weakness in its flagship flash memory business.

In its last earnings report on July 15, AMD predicted sales would be "up moderately" from second-quarter levels of $1.26 billion.

The current consensus estimate, which will need to be revised down, had assumed AMD could deliver $1.34 billion in sales, according to Thomson First Call.

Despite the lower sales levels, AMD said its third-quarter net income should increase from the second quarter's $32 million, though it didn't offer a per-share outlook. Analysts were assuming AMD could deliver earnings of 14 cents a share.

"Our gross margin and net income are expected to improve sequentially from the second quarter of 2004, largely due to significantly higher sales and stronger average selling prices in our processor business," said Chief Financial Officer Robert Rivet in a prepared statement. "Although third-quarter sales are anticipated to be lower than projected due to softness in our profitable flash memory business, sales in our microprocessor business remained strong driven by increased demand for AMD64 processors."

AMD is due to report earnings on Oct. 7.

The stock was down 50 cents, or 3.7%, to $13.20 Tuesday morning.