After warning of lower profits due to declining sales of its memory products, Advanced Micro Devices (AMD) shares fell 20%.
The company announced that sales for the fourth quarter ended December 26, 2004 are expected to be up slightly from the $1.239 billion reported in the third quarter. They anticipate Fourth quarter operating income to be positive, but down significantly from third quarter operating income of $68.4 million.
In what the company describes as a “competitive and challenging NOR Flash memory market”, the Memory Group is anticipated to have lower fourth quarter sales and an operating loss.
“AMD is going to hurt the tech sector, and I think trading will go on the defensive again,” says Michael Metz, chief investment strategist at Oppenheimer & Co. “AMD’s warning may also foreshadow poor numbers from Intel. I think the market will try to rally today, but I don’t think it’s ready for a significant turn.”
AMD had originally anticipated overall sales to increase, driven by processor sales that exceeded seasonal trends, and Flash memory sales that were flat to up.
According to an article from Charlotte.com,
“Joseph Osha, an analyst at Merrill Lynch, said that based on AMD’s warning, it’s likely that Intel has been pricing its flash chips more aggressively during the fourth quarter.
Osha estimates that gross margins in AMD’s flash business declined to 25 percent in the fourth quarter from 30 percent in the third quarter, and operating margins in flash will come in at a 5 percent loss in the fourth quarter, compared with a 3 percent profit in the previous quarter.”
Murdok | Breaking eBusiness News
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