SAN FRANCISCO -- Those who say that PC chip maker
Advanced Micro Devices
can't execute strategy as well as rival
could nod smugly Wednesday when AMD missed the Street's earnings consensus by 3 cents in its fourth-quarter earnings report.
AMD reported revenues of $789 million, or 29% above the $613 million generated in the fourth quarter of 1997. Net income came in at 15 cents a share, compared with a 9-cent loss in the year-ago quarter. The earnings figure was below
's 19-cent consensus forecast. (The consensus forecast was raised from a previously reported 18 cents.) Yesterday, Intel surprised the Street with a $1.19 a share profit, 12 cents above expectations.
In a conference call to discuss the numbers, CEO W.J. "Jerry" Sanders III said AMD sold a robust 5.5 million units in the quarter ended Dec. 27, but only 34% of them carried a speed faster than 350 MHz, a ratio that was far below what Sanders said the company had expected.
AMD can't ascertain a chip's speed is until it comes off the production line, says Tad LaFountain at
Needham & Co.
Slower chips cost as much to make as the faster ones but are sold at much lower prices. Producing so many of the slower chips depressed AMD's average sales price to $89 from the third-quarter ASP of $100.
The dramatic slide in ASPs weighed on the company's profits, giving it a gross margin at 39% for the quarter, even with the previous quarter's margin. Sanders said increased sales of 400 MHz chips in the first quarter should raise the gross margin above 40%.
"The vast majority should be greater than 350 MHz," Sanders said. He added that the company had problems with its product distribution. "We've got that problem behind us," he said.