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February 4, 1999


By CBR Staff Writer

Advanced Micro Devices Inc said Thursday that it may see an operating loss in the current quarter amid pricing pressure from Intel Corp. The Sunnyvale, California-based chip maker attributed the realization to a re-assessment of competitive conditions. It said that in light of Intel Corp’s recent moving up of price reductions by three weeks to February 8, and pending product announcements, it will be unable to increase its average selling prices for the quarter, despite a richer product mix. Rumors have been flying about the company in the past two days, as it canceled appearances at two technology conferences and many were expecting an announcement that it would soon be selling its Vantis division. Following a poor fourth-quarter in which design flaws hampered the clocks speeds – and thus the ASPs – of its K6- 2 chips, AMD was looking to keep its ASPs at around $100 for the first quarter. But now, despite the fact that the company claims to have finished its design enhancements, it says it will be unable to increase ASPs in the quarter – and some analysts say that pricing pressures may force them as low as $60. Gross margins will therefore see additional pressure and, when coupled with planned R&D spending on technology development in the alliance with Motorola Inc and at its new Dresden fab, an operating loss appears to be all but unavoidable. The news came on the same day that AMD confirmed it had finally won Gateway Inc as a customer, and the company’s shares responded by falling $2, or nearly 10%, to close at $18.9375 Thursday.

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