AMD falls back into the red

As expected, AMD plunged back into the red in the final quarter of 2004 despite a rise of 29 per cent in processor sales. The company reported a net loss of $30 million compared with a profit of $43.2 million for same quarter in 2003.

The company’s share price has dropped by a quarter when it issued a profit warning last week.

The losses stemmed mostly from the Spansion Flash memory business, which the company runs as a joint venture with Fujitsu. Flash memory chips are used widely in consumer mobile devices such as phones and MP3 players. There was also a hefty debt repayment and conversion charge of $49 million.

The memory business sales fell to $504 million from $566 million with the losses rising to $39 million from $3 million. Things are not set to look any better as the market is still suffering a glut of products. The first quarter of any year tends to be quiet.

The losses and the uphill struggle that AMD faces against the likes of Samsung, which now holds about half the world’s memory business, increased speculation that AMD might sell off its memory business. Certainly, AMD has promised to look at slashing costs in the group if things don’t improve

On a brighter note, the processor business continued to surge ahead. The Computation Processor Group (CPG) rose nine per cent over the year. Sales at $730 million were up 26 percent over the fourth quarter of 2003 and increased by nine percent from $673 million in the third quarter of 2004. CPG generated operating income of $89 million in the fourth quarter, the same as Q3. AMD’s 64 bit range continued to shine and now account for over 50 per cent of the groups sales.

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