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AMD Expects Rebound After Weak Second Quarter

MANHASSET, N.Y. — Declining average selling prices for high-volume desktop processors sent AMD Inc.'s sales and earnings tumbling for the second quarter of 2006.

AMD (Sunnyvale, Calif.) reported sales of $1.22 billion, operating income of $102 million, and net income of $89 million, or 18 cents per share for the quarter ended July 2, 2006. These results include $18 million of employee stock-based compensation expense and a net gain of $10 million associated with Spansion LLC's repurchase of its 12.75 percent senior subordinated notes.

The company had reduced second-quarter guidance earlier this month, calling for sales of $1.215 billion, after warning of a flat second quarter following a strong first one. In the first quarter, AMD posted sales of $1.332 billion, net income of $184.5 million, and operating income of $259 million.

During a conference call with analysts, AMD chief executive Hector Ruiz and other company officials said they expected demand to be "seasonally strong" in the second half of 2006, and projected third quarter sales to increase sequentially. However, Ruiz was vague about giving specific figures.

"Our customers tell us they expect demand for our products is healthy, and some customer acquisition strategies makes us optimistic we're going to gain market share," Ruiz said.

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