AMD shares rise on IBM rumours

AMD shares rise on IBM rumours
David Manners Although AMD reported a larger than expected loss for the first quarter, the company’s shares climbed on rumours of an investment by IBM. Both IBM and AMD are denying the rumours which have been circulating the industry for six months. However, they gained credence by surfacing in an analyst’s report – from Piper Jaffray of Minneapolis – which claimed IBM had invested in AMD and would invest more. AMD’s loss for the quarter was $55.8m on revenues of $540m which were 12 per cent down on the last quarter and two per cent down on the same period last year. Shares topped $30 after rising through last week. Heavy expenses are thought to have been incurred in Dresden where AMD is readying a fab. On the upside, AMD is expected to sell 15 million K6 microprocessors this year compared with three million in 1997 buoyed by three factors: output from IBM’s sub-contract manufacturing arrangement which starts in the fourth quarter, the resolution of AMD’s K6 manufacturing yield problems, and thirdly, what chairman Jerry Sanders III describes as an ‘excellent’ transition to 0.25?m processing. The quarter micron process accounts for half the production from its Austin, Texas fab and delivers a theoretical maximum of 340 K6 die per 8in. wafer. By the end of Q2, says Sanders, the transition to 0.25?m should be complete. AMD may then expand production at Austin from the current level, said to be 13,500 wafers a month. Most of 1998’s unit production will come in the year’s second half, says Piper Jaffray, with five million in Q3 and six million in Q4. It is thought that Sanders, AMD’s founder and chairman, is on a five-year contract expiring in 2003 and has designated the company’s chief technical officer Atiq Raza, to take over from him.


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