AMD's profits grow on Opteron, flash memory

Chip vendor has second straight profitable quarter, revenue up 73 percent over 2003

Advanced Micro Devices Inc. (AMD) posted its second straight profitable quarter, as higher flash memory and Opteron sales led the way in the first quarter of 2004, the company said Wednesday.

Revenue was $1.2 billion, up 73 percent from $715 million AMD recorded in the first quarter of 2003. Net income was $45 million, compared to a loss of $146 million in the first quarter of last year.

"The first quarter of 2004 was a high-water mark for AMD. It was a quarter in which we delivered on a very important promise to ourselves -- to make money," said Hector Ruiz, chairman, president, and chief executive officer of AMD, on a conference call following AMD's announcement. The company set a record for quarterly revenue in the first quarter, he said.

Flash memory revenue was up 188 percent from last year's first quarter to $628 million, and the group posted a profit of $14 million. AMD's flash memory business is known as Fasl LLC, and is operated through a joint venture with Fujitsu Ltd. in which AMD is the majority partner.

Average selling prices for AMD's flash memory products rose along with unit shipments, especially in Asia-Pacific and the Americas, said Robert Rivet, chief financial officer. Shipments of its latest flash memory technology, known as Mirrorbit, also rose, he said.

AMD's new chips led the way in a solid quarter for the company's microprocessor business. While Opteron represents a relatively small portion of AMD's overall processor shipments, unit shipments doubled in the quarter as partners such as Sun Microsystems Inc. introduced their new servers based on the chip, Ruiz said.

AMD's presence in the server market was virtually nonexistent prior to Opteron, leaving a great deal of room for the Sunnyvale, California, company to grow, Ruiz said.

Shipments and average selling prices of the rest of AMD's product portfolio, including the Athlon XP desktop processors, also increased compared to the first quarter of last year, Rivet said. The first quarter is historically a weak quarter compared to the fourth quarter, but AMD's revenue decreased only 2 percent from the fourth quarter.

By the end of 2004, AMD will be earning more revenue from its eighth-generation Opteron and Athlon 64 processors than its seventh-generation Athlon XP processors, Ruiz said. The chips will continue to grow as more software partners develop 64-bit versions of their products, and Microsoft Corp. releases the 64-bit version of Windows XP, he said.

AMD is on track to start volume production of its chips on its 90-nanometer process technology during the second quarter, Ruiz said. The company will ship products for revenue in the third quarter, he said.

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