W.J. "Jerry" Sanders must think he's on a roller coaster. As recently as midsummer, the silver-haired, silver-tongued chairman of Advanced Micro Devices was looking forward to an upswing, thanks to strong demand for its new K6 chips. But on Oct. 7, AMD came down to earth with a third-quarter loss of $31.7 million. Only a week earlier, analysts had expected a loss of just $4 million.
Third-quarter revenues rose 31% from last year, to $596.6 million. But that didn't offset the problem AMD is having manufacturing K6 processors, which rival Intel's latest Pentiums but cost 25% less. AMD hoped to ship about 1.4 million K6s in the quarter but managed about 1 million. And only 15% of them were the fast-est K6 model, which sells for top dollar. "We needed to execute flawlessly, and we didn't," Sanders says.
Wall Street is wearying of AMD's failure to deliver consistently. The stock has dropped 25% since early September. But Sanders predicts that AMD can ship 2 million K6s in the fourth quarter. If so, hang on to your seats.