Restructuring pushes up AMD Q4 net loss

Advanced Micro Devices Inc.'s journey to profitability hit a roadblock in the fourth quarter, as revenue decreased by 28% year over year to $686 million and the company posted a net loss of $855 million.

Excluding restructuring and other charges, the Sunnyvale, Calif., company lost $235 million, or 68 cents per share, widely missing a consensus estimate of a 42-cent loss by analysts polled by Thomson Financial/First Call. However, fourth-quarter revenue did slightly exceed analysts' expectations of $683 million. In the third quarter, AMD posted a net loss of $254 million on sales of $508 million.

"There's no doubt 2002 was an awful year, but we believe the worst is behind us," Hector Ruiz, AMD's president and CEO, said in a conference call.

The company took a $331 million restructuring charge for severance packages given to employees after AMD announced that it would lay off 2,000 workers by the second quarter of this year. It also took a charge of $46 million due to "a one-time research and development expense in connection with product development services received in the fourth quarter," the company said. An additional charge of $243 million was taken to defer tax credits until AMD becomes profitable again, said Robert Rivet, AMD's chief financial officer.

In December, AMD predicted that fourth-quarter revenue would be about $700 million, citing strong demand for its processors and flash memory products.

Revenue from processor sales in the fourth quarter increased by 60%, to $420 million, from third-quarter revenue of $262 million. Both the number of units and the average selling prices of those units increased in the fourth quarter, AMD said. Flash memory sales increased 15%, to $217 million in the fourth quarter from $189 million in the third quarter, AMD said.

Looking ahead, AMD said it expects processor revenue to be flat or slightly up, despite historical trends that predict a 5% to 8% drop from fourth-quarter revenue. Rival chip maker Intel Corp. on Tuesday predicted that its first-quarter revenue would fall slightly, in line with seasonal patterns (see story).

The full year wasn't kind to AMD, which posted a net loss of $1.3 billion on revenue of $2.7 billion for 2002. In 2001, the company lost nearly $61 million on revenue of $3.9 billion. Inventory problems caused the company to cut back on production in the third quarter.

AMD has said it will cut costs to become profitable by the fourth quarter of 2003. The company is counting on the launch of its Opteron server chip and Athlon 64 chip in April to boost its 2003 revenue, it has said. AMD will also release next month a chip based on its larger-cache core, code-named Barton, Ruiz said.

Copyright © 2003 IDG Communications, Inc.

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