SUNNYVALE, California -- Advanced Micro Devices said Thursday it could incur an operating loss in its current first quarter, in light of accelerated chip price cuts by its main rival Intel.
The announcement confirmed what many analysts had begun to speculate late Wednesday and early Thursday, after AMD (AMD) cancelled two upcoming presentations at technology investment conferences, fueling a sharp drop in its shares in two days.
Earlier Thursday, some analysts had already begun cutting 1999 earnings estimates, or warned that AMD might see an earnings shortfall, due to an increasingly tough price war with Intel (INTC).
"The competition is big, mean, and great," said Scott Allen, a spokesman for AMD, based in Sunnyvale, California.
But he added that AMD plans to further enrich its product mix going forward with chips like the K6-3 and others.
"We believe we are looking at a one quarter event," he said.
Allen said that AMD's K6-3 chip, which will compete directly with Intel's upcoming Pentium III chip, is on schedule and should be in systems on retail shelves at the end of the first quarter or the beginning of the second quarter.
Intel, which was a latecomer to the low-end PC market, has recently come on strong with its Celeron processor designed for PCs costing US$1,200 and below. In a move to gain back lost market share in that segment of the market, Intel has moved up new product launches and price cuts in the Celeron family.
AMD, with Intel's recent acceleration of its price cuts and the expectations for its new Pentium III products, is reassessing its competitive response.
AMD shares tumbled earlier before they were halted from trading on the New York Stock Exchange, pending news. AMD shares fell $2.06 to $18.88 Thursday and were the second-most active stock on the NYSE.
Analysts had been forecasting that AMD would report earnings of 13 cents per share for the first quarter, versus a loss of 39 cents in the year-ago quarter, according to the consensus provided by First Call.
Copyright© 1999 Reuters Limited.
