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Is the 'Bust' Over For AMD?

Boom and bust cycles have long been a way of life for Advanced Micro Devices Inc. Mired in a bust cycle for several quarters, the semiconductor company is not only threatening to be profitable in the current quarter, but it is planning to build a major new plant and to introduce a brace of microprocessors next year.
"There is definitely a perceived recovery here," said AMD Chief Executive Hector Ruiz at the firm's annual analyst meeting Thursday. "We expect the microprocessor business to be profitable." The firm last saw a profitable quarter in the second quarter of 2001.

Still questionable, though, is AMD's flash memory business, which is teetering on the brink between the red and the black. The company is attempting to shrink the size of its flash chips -- a measure that will be more attractive to mobile phone makers. Particularly targeted for shrinkage are its MirrorBit flash components.

AMD said it planned with a partner to build a costly 65-nanometer plant (as much as $2 to $3 billion are the outside estimates) but it declined to reveal the identity of the partner or the location of the facility. The comment, however, immediately set off speculation -- possibly with IBM in New York State, or in Austin where Ruiz is headquartered, or in Dresden, Germany, where AMD already has a modern plant, or in Singapore, which is offering enticing tax incentives.

As for processors, the company outlined a roadmap of devices scheduled for introduction next year including several new chips. Company executives said AMD will concentrate more on server and notebook processors than on desktop devices even though the desktop -- as AMD's traditional cash cow -- will continue to deliver most of its revenue and profits. Servers and notebooks represent important new areas for growth.

The company also revealed strategic plans for more distant generations of products. The next generation K9 processor is slated to ship late in 2005 and an entirely new class of very inexpensive processors for low-end PCs is also in the works. Precise shipping dates were not given.

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