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AMD Vows Not to = Repeat=20 MisstepsDecember = 14,=20 2007; Page B3 Advanced=20 Micro Devices Inc. apologized to Wall Street for botching its = handling=20 of a high-end chip line. But the chip maker still faces skepticism = about=20 its prospects. At a meeting with analysts, AMD executives vowed = not to=20 repeat stumbles that helped shave nearly 40% off its market value = since=20 mid-October. The company predicted it will return to profitability = on an=20 operating basis in the third quarter of next year, though a net = profit=20 will take longer because of factors that include write-offs = associated=20 with its 2006 acquisition of ATI Technologies. AMD, based in Sunnyvale, Calif., plans to reduce = capital=20 spending by 35% to $1.1 billion in 2008 and take other moves to = reduce=20 costs. It is also stepping up efforts to sell chips for = noncomputer=20 products such as TV set-top boxes and cellphones. With all of its strengths, the recent stock drop = "just=20 doesn't make sense," argued Hector Ruiz, AMD's chief executive. He = and=20 other executives acknowledged, however, that the company irked = customers=20 with a microprocessor called Barcelona. The chip, AMD's first with four calculating = engines, was=20 introduced in September -- later than the company had hoped -- and = operated at slower speeds than expected. Then AMD disclosed a = design flaw=20 this month that will push back big production volumes until late = in the=20 first quarter of 2008 or the second period and also affect a=20 quad-processor PC chip called Phenom. "We blew it, and we're very humbled by it," Mr. = Ruiz said.=20 "And we learned from it, and we're not going to do it again." The company faces improved chips from rival In one change disclosed yesterday, AMD is = adjusting a plan=20 dubbed Fusion to combine its computing circuitry with ATI's = graphics=20 technology on a single chip. In July, AMD said the first product = from that=20 effort would use a sophisticated new microprocessor design, = code-named=20 Bulldozer. Now AMD plans to make its first multifunction = chip using=20 modifications of an existing microprocessor, in a product called = Swift=20 that will arrive in mid-2009. In an interview, Mr. Ruiz said = customers=20 wanted AMD to reduce design risks and deliver a product = sooner. Roger Kay, an analyst with Endpoint Technologies = Associates=20 Inc., said the change raises the odds that AMD will still lag = behind=20 Intel's performance in two years. "I think it basically makes them = fall=20 behind," he said. AMD's stock initially slid 5% following the = company's=20 comments but rebounded to close at 4 p.m. at $8.84, off 13 cents, = in New=20 York Stock Exchange composite trading. JoAnne Feeney, an analyst = at FTN=20 Midwest Securities Corp., said the initial drop may have reflected = disappointment that AMD didn't disclose details about a = long-discussed=20 plan to reduce costs by relying more on other companies' chip = factories.=20 Mr. Ruiz said the company won't discuss its plans until they are=20 finalized. Ms. Feeney argued that AMD should be able to = rebound soon,=20 with the redesigned Barcelona chip and the ability to offer = computer=20 makers combinations of chips using ATI products. "We should be = past=20 shortcomings in the processors in about a month and a half," she = said. Write to Don Clark at don.clark@wsj.com and Riva = Richmond at=20 riva.richmond@dowjones.com=
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