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7/22/2009
09:22 AM
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AMD Losses Lessen In 2Q

The chip maker's 11th consecutive quarterly loss reflects intense competition from Intel and effects of the economic recession.

Advanced Micro Devices on Tuesday reported a narrower loss in the second quarter, but failed to meet Wall Street expectations.

AMD posted its 11th consecutive quarterly loss as revenues fell 13% from the same quarter a year ago to $1.18 billion. The company's net loss was $330 million, or 49 cents a share, compared to $1.2 billion, or $1.97 a share, a year ago.

Analysts polled by Thomson Reuters had expected the company to report a loss of 47 cents a share on revenue of $1.13 billion. AMD shares fell 13% in after-hours trading to $3.55.

"While we increased cash, exceeded our revenue plan and reduced operating expenses in the second quarter, gross margin was disappointing," Dirk Meyer, president and chief executive of AMD said in a statement. The company gross margin dipped to 37.2% from 37.5%.

AMD's results reflect its struggles to reach profitability that has so far been blocked by intense competition from Intel, the economic recession, and the billions of dollars in charges related to the 2006 acquisition of graphics chip maker ATI Technologies. To help stem the bleeding, AMD this year spun off its manufacturing operations into a joint company with Advanced Technology Investment Co., formed by the Abu Dhabi government.

Besides partnering in manufacturing with ATIC, AMD is looking to get back into the black by filling the gaps in the market left by Intel. For example, AMD launched in June a six-core server processor code-named Istanbul that can be used in current systems running older processors to boost performance without replacing the whole computer.

AMD in time could also get help from a European Union ruling that found that Intel had kept its smaller rival out of competition for contracts by paying computer makers not to use its products. The ruling, which led to a record $1.45 billion fine against Intel, is likely to result in continuous scrutiny of its business practices by the EU.

Also, IDC reported in May that AMD's market share had gained 4.6%, primarily at the expense of Intel. The increase was attributed to AMD lowering prices.

For the current quarter, AMD predicted revenue would be up slightly. Analysts, on average, expected a 7% increase in sales, according to Thomson Reuters.


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