AMD Shares Fall in Wake of 3Q Loss

Shares of chipmaker Advanced Micro Devices Inc. shares fell more than 3 percent Friday after reporting a loss of nearly $400 million for the third quarter.

The world's No. 2 maker of microprocessors behind much-larger Intel Corp. has lost $1.6 billion so far this year.

AMD shares fell 50 cents, or 3.4 percent, to $14.05 in morning trading Friday.

After the stock markets closed Thursday, Sunnyvale-based AMD reported it lost $396 million, or 71 cents per share, during the July-September quarter. That compares with a profit of $136 million, or 27 cents per share, in the same period a year ago.

Analysts surveyed by Thomson Financial were expecting AMD to lose 62 cents per share.

AMD said many analysts already excluded from their estimates the $120 million, or 22 cents a share, in one-time expenses related to its $5.6 billion acquisition of graphics chip maker ATI Technologies Inc. and other activities.

On that basis, AMD said it lost less money that Wall Street predicted.

The company does not provide profit figures excluding all one-time charges, which companies typically like to exclude to paint a more complete picture for investors about the health of day-to-day operations.

While AMD is fighting back toward profitability, its revenues continue to grow.

AMD's $1.63 billion in sales for the latest period reflected a 23 percent increase over last year, easily surpassing the average analyst estimate of $1.52 billion.

AMD's revenues were bolstered by higher microprocessor sales and the first shipments for revenue of its new Opteron brand server chip, which launched in September and is a critical weapon in its fight with Intel for market share.

For the first nine months of the year, AMD lost $1.61 billion on sales of $4.24 billion.

Hearty PC demand around the world is driving up the need for microprocessors, which act as the brains of those computers, helping strengthen both AMD and Intel.

On Tuesday, Intel reported a 43 percent jump in third-quarter profits on soaring sales that hit $10.09 billion during the period.

Both companies sought to soothe analysts' fears about a possible slowdown in chip orders during the holiday season resulting from computer makers overestimating their needs. But Intel and AMD management said demand remains strong and the companies aren't seeing any sluggishness.

Intel offered an upbeat financial forecast, and AMD said it expects higher fourth-quarter revenue.

Investors were heartened by improvements in AMD's closely watched gross profit margin, or the amount a company earns on every dollar of revenue once the cost of making its products is stripped out.

AMD's gross margin of 41 percent of revenues in the latest quarter was lower than a year ago, but still a substantial rise over the 33 percent of revenues recorded in the second quarter. AMD attributed the gain to higher microprocessor sales and improvements in manufacturing and inventory management.

AMD customers also bought more expensive and profitable chips in the latest period, the latest sign that a fierce price battle with Intel is abating.

Plunging prices and heavy spending to install new chip-making equipment in their factories hurt both Intel and AMD over the past year.

However, investors have punished AMD's stock on fears about the company's financial health, chopping shares from above $40 in early 2006, a decline that's wiped out more than $12 billion in shareholder wealth.

Meanwhile, Intel's market value has soared, from about $95 billion before the launch in July 2006 of a powerful new lineup of chips to more than $157 billion today. The stock has appreciated 64 percent in that span.

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