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EDITIONS
Thursday, 3 October, 2002, 16:55 GMT 17:55 UK
Weak sales hammer AMD
An AMD chip on display
AMD is a leading supplier of computer-grade microchips
Shares in semiconductor maker Advanced Micro Devices (AMD) have lost nearly a third of their value on news that the firm expects to miss its sales targets.

The slump came as investors digested a warning from the company, issued late on Wednesday, that sales for the July to September period would come in 18% below analysts' forecasts at about $500m (310m).

The company's shares were down more than 28% at $3.85 in late morning trade on Wall Street.

AMD, a leading supplier of computer-grade microprocessors, blamed its faltering performance on weak demand for personal computers.

It said new orders had fallen because computer makers, faced with sluggish sales growth, had started to build up stockpiles of microchips and other components.

Going gets tough

The sales downturn is the latest in a series of setbacks for AMD, which has been hit in recent months by uneven financial results.

Some analysts said the company could face cash shortages if sales do not pick up soon.

"Unless results improve over the next few quarters... AMD will require external financing in 2003 to fund operations," investment bank Credit Suisse First Boston said in a report.

In a further sign of ebbing investor confidence, stock tippers at Wall Street brokerage Salomon Smith Barney downgraded AMD's share price target from $8 to just $5.

Weakening demand for semiconductors used in personal computers and other consumer gadgets such as mobile phones is also weighing on other firms in the sector

Sectoral gloom

On Wednesday, UK chip designer ARM Holdings lost nearly two thirds of its market value after warning that it would miss its profit targets because of "deteriorating" market conditions.

Even Intel, the giant in the microprocessor world thanks to the dominant position of its Pentium chips and its close relationship with software leviathan Microsoft, is suffering.

Its financial position is more healthy than AMD's, but the firm predicted in September that sales would be at the lower end of expectations.

AMD reassured investors that revenues should increase during the last three months of the year, lifted by buoyant pre-Christmas sales of PCs and other gadgets.

But for now, the personal computer market remains firmly in the doldrums.

Forecasts from investment bank Investec warn that third quarter PC shipments worldwide are likely to rise just 5%, rather than the usual 10-15%.

See also:

03 Oct 02 | Business
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19 Jun 02 | Business
07 Jun 02 | Business
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