Processors Remain a Bright Spot Despite AMD's Q4 Warnings


Dragged down by sagging flash-memory sales, AMD today issued a warning to the financial community that its fourth quarter earnings won't meet expectations.

Fourth quarter operating income is anticipated to be positive, but "down significantly from third quarter operating income of $68.4 million," AMD said in a statement.

The company added that sales for its fourth quarter, which ended Dec. 26, 2004, are expected to be up slightly from the $1.239 billion reported in the third quarter.

The scrappy chipmaker will formally announce those fourth quarter results next week.

The poorer-than-expected results are due to what AMD calls "a competitive and challenging NOR Flash memory market." Indeed, the company's Memory Group, which AMD had expected to see steady or rising sales, is now expected to show lower fourth quarter sales as well as an operating loss.

However, the category most relevant to the reseller community -- processors -- remains a bright spot for AMD. The company's Computation Products Group (CPG) is continuing "its upward trajectory, and fourth quarter sales are expected to increase compared to the prior quarter," AMD's statement said.

Indeed, AMD is continuing to report robust adoption of Opteron, the 64-bit commodity server chip released in 2003. The processor is currently sold in servers made by Tier 1 vendors Hewlett-Packard, IBM and Sun Microsystems, as well as many custom systems houses. There are rumblings that direct giant Dell is considering using the device -- something Dell strenuously denies, though it admits it has evaluated the processor.

In 2005, AMD's client-side Athlon 64 processor is likely to receive a big boost. That's because Microsoft's 64-bit version of Windows XP, currently in beta testing, is scheduled to be officially released. When that happens, sales of Athlon 64-based desktop systems are expected to soar.

On the downside for AMD, Intel remains by far the largest microprocessor vendor. The company has fielded a 64-bit version of its Xeon processor, which competes with Opteron. Intel is scheduled to announce its fourth quarter earnings later today.