AMD backs forecast after Intel warns

SUNNYVALE, Calif (Reuters) - Chipmaker Advanced Micro Devices (AMD.N) stood firm on its financial forecast on Thursday, one day after Intel cut its fourth quarter revenue forecast by 14 percent, sparking fears about the PC industry.

Shares of both companies, which make virtually all the microchip processors for computers, rose along with the broader market and AMD acting Chief Financial Officer Robert Rivet called the economic downturn "a storm that will pass".

"We will come out of it in a better economic position," he told an analysts' day gathering at the company's headquarters.

"We're not going to change our guidance," Rivet added, although he said AMD would update progress in December.

Nearly a month ago, AMD reported better-than-expected results and projected that fourth quarter revenue would be flat.

Rivet said that once AMD hives off its manufacturing arm early next year, it expected to cut its capital expenditures to $300 million from $800 million, and that in 2009 they would aim for gross revenues of 45 percent.

He said the company hopes for 2009 sales growth of 4 percent to 5 percent in units, assuming global Gross Domestic Product of 1.8 percent.

A Wall Street analyst who asked not to be identified said AMD was overly optimistic and that many of his colleagues believe PC growth will range from one to two percent growth to a small shrinkage of sales.

Intel had said demand was bad around the world and in all market segments.

AMD IMPROVEMENT

But analysts did believe that talk of an AMD bankruptcy could now be put behind, given the spinoff of manufacturing.

"They have done just about everything to rebalance and redirect the company," said Jon Peddie, who has his own research firm.

He said AMD had reduced debt through the deal to split off manufacturing, lowered costs and brought out its new Shanghai processor for servers earlier and with higher performance than expected, especially in graphics.

He noted that Shanghai was being used by Hewlett-Packard (HPQ.N), Dell (DELL.O), Sun Microsystems (JAVA.O) and others.

Intel (INTC.O) is bringing out a new server processor next year known as Nehalem that will match many of Shanghai's selling points, including quicker input and output and quicker memory access,

Patrick Wang of Wedbush Morgan Securities said Nehalem's mass market version will not get to market until two to three months after Shanghai, and will be as much as three quarters behind in the smaller, high-end market that requires sets of four or more chips in one server.

"Intel's job is to de-throne them," he said.

What AMD has not done is to meet Intel head-to-head in the "netbook" category for low-powered machines which are smaller than miniature laptops. Intel has been selling its low-powered Atom processor for months and has declared it a success.

"We're ignoring it," said AMD Chief Executive Dirk Meyer. He and other AMD executives were dubious about Intel's claims that the Atom is creating new markets rather than stealing from higher-end markets.

AMD will offer its own low-end platform next year, but it will be higher-powered and cost more than the Intel offering.

(Editing by Bernard Orr)