Chip Maker Predicts Lower Profits Advanced Micro Devices Stock Sinks After Announcement

Advanced Micro Devices Inc. said Monday that fourth-quarter profit will be below expectations because of disappointing shipments of its flagship 486 microprocessor.

AMD, the nation’s fourth-largest maker of computer chips, said it was hurt by unforeseen 486 sales by industry leader Intel Corp. Intel has been emphasizing its later-generation Pentium processor and its new Pentium Pro.

“The supply of 100Mhz 486 microprocessors from Intel prevented AMD from achieving our expected unit shipment goal,” said W.J. Sanders III, AMD’s chairman and chief executive officer.

Fourth-quarter earnings also will be below the third quarter profit of $56.2 million, the company said. AMD earned $40.8 million in the fourth quarter last year.

The Sunnyvale, Calif.-based company gets most of its profit from its 486 chips. It is working on a new processor to rival the Pentium, but that chip has been delayed and won’t be on the market until the middle of next year.

“AMD is in a tough spot … they’re working very hard to get out,” said Jim Turley, senior editor of Microprocessor Report, an industry newsletter. “Because of scheduling slips of their Pentium-class processor, they’ve not been able to deliver any of the high profit-margin products they would have liked.”

The company’s stock closed down $1.12-1/2 to $17.12-1/2 on the New York Stock Exchange Monday.

Analysts surveyed by Zacks Investment Research before Monday’s announcement on average forecast a profit of 56 cents a share for the current quarter. Their estimates ranged from 44 to 75 cents.

AMD has been hurt by the personal computer industry’s switch from 486 processors - made by Intel and AMD to Intel’s Pentium.

Intel still makes 486 processors, but most go into notebook computers, electronic devices and personal computers sold overseas.

“Intel has tried very hard to make the 486 yesterday’s news, and at this point it’s a foregone conclusion that (no one) would buy a computer with a 486 in it. The Pentium has become the baseline everyone looks for,” Turley said.