AMD Predicts Sales Shortfall, Blames SARS

Number two chipmaker AMD has announced its second-quarter sales will fall short of expectations by some US$100 million, a gap the company blamed on SARS-related sales slowdowns in the Asia-Pacific region.

AMD said concerns and lifestyle changes brought about by severe acute respiratory syndrome will help hold sales down to about $615 million, compared with its own earlier forecast of $715 million and analysts’ consensus target of $723 million.

“The anticipated global sales improvement in the month of June did not materialize as we had anticipated,” said AMD CFO Robert Rivet. “The decline in personal computer and handset sell-through in China and other Asian markets, largely related to the SARS epidemic, significantly affected AMD’s sales.”

Not Alone

AMD is only the latest of several second-tier tech firms to warn about the current quarter’s sales, with Texas Instruments and Motorola also saying projected sales growth has yet to materialize.

So far, however, no technology bellwether has released an overall earnings warning, leaving open the possibility that tech stocks will hold on to most of their recent gains. For instance, although Intel has considerable exposure in the Pacific region, it held steady on its quarterly outlook earlier this month.

In fact, some analysts expressed skepticism about how much impact SARS truly has had on AMD’s and other firms’ sales. They questioned whether the outbreak of the disease, which has limited travel and social interaction in several Asian economic centers, is being used as a crutch to prop up weak overall performance.

Impact Felt

Others say the concerns are real. Several major analyst houses recently updated their 2003 forecasts for personal computer sales to take into account the impact of the extended SARS outbreak.

IDC analyst Kitty Fok told the E-Commerce Times that it appears the impact will be “significant but not dramatic” and may even be good news for some tech equipment makers in the long run.

“Consumer demand has been depressed by SARS in the short term, but we are expecting a sharp recovery once we get past this,” Fok said. Meanwhile, she added, the epidemic may hasten the pace at which mobile computing and telecommuting are adopted in many Asia-Pacific countries. “There may be an upside for companies that are able to respond to the new market demands.”

Vying for Share

Although Intel remains the clear market leader in the semiconductor field, AMD has been gaining ground in some areas, such as flash memory, where most analysts agree Intel opened itself up to competition with a unilateral price increase earlier this year.

AMD, which will report second-quarter results July 16th, saw its share price rise slightly in early trading Wednesday to $6.43.

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