AMD Reports ‘Dismal’ Quarter

Slack sales of memory chips contributed to what the chief executive of Advanced Micro Devices Inc. called a “freaking dismal” fourth quarter: The chip maker lost $30 million.

“2004 was a record in many ways, but the finish was disappointing,” CEO Hector Ruiz said in a conference call with financial analysts.

Sunnyvale, Calif.-based AMD reported a net loss of $30 million, or 8 cents a share, contrasted with a profit of $43 million, or 12 cents, in the previous year’s fourth quarter. The loss came despite record quarterly sales of $1.26 billion, up 5%.

For the year, the second-largest chip maker earned $91.2 million, or 25 cents a share, on sales of $5 billion, up from a loss of $274.5 million, or 79 cents, on sales of $3.52 billion in 2003.

Intense pricing competition and seasonal downturns in flash memory -- silicon chips that retain data when devices such as mobile phones and digital cameras are turned off -- will continue to pressure AMD, executives and analysts said.

“The flash business seems like it’s hit an inflection point. They’re starting to lose share in the wireless area,” said Tai Nguyen, an analyst in San Francisco with Susquehanna Financial Group. “I would expect them eventually to come back, but I expect the flash business to be under pressure in the next two or three quarters.”

Another factor is the increased aggressiveness of South Korea’s Samsung Corp. in the global market for flash memory, said Michael Cohen, an analyst at Pacific American Securities in Fremont, Calif.

“This is bringing pricing pressure from which both AMD and STMicroelectronics have suffered,” Cohen said. STMicro is Europe’s largest semiconductor manufacturer.

AMD shares rose 34 cents to $15.50 in regular trading on the New York Stock Exchange but slipped to $15.22 after hours, following the earnings announcement.

AMD’s quarter included charges of $49 million, or 13 cents a share, related to debt conversion and retirement.

Analysts were caught somewhat by surprise, however, when AMD warned this month that fourth-quarter operating income would be “down significantly” from the third quarter because of a “competitive and challenging” environment in flash memory.

Chief Financial Officer Robert Rivet told analysts that he expected AMD’s momentum in processor sales to increase in 2005, with sales flat or down slightly in the first quarter, typically a slower quarter.