<BREAKFAST WITH THE FOOL>

Friday, February 5, 1999

"There are three faithful friends: an old wife, an old dog, and ready money." -- Benjamin Franklin

Latest Market Numbers

AMD Warns of Q1 Loss

Computer chip maker Advanced Micro Devices (NYSE: AMD) warned that it could post an operating loss this quarter due to pricing pressures. The company said that in light of earlier-than-expected price cuts by arch-nemesis Intel (Nasdaq: INTC), it is "reassessing [its] competitive response," which will likely mean that it won't be able to raise average selling prices for microprocessors during the current quarter. This could hurt AMD's gross margins. In addition, improvements to increase the production of higher-speed versions of the AMD-K6-2 processor with 3DNow! technology won't really kick in until the second half of the quarter.

"Coincidentally," Tom Kurlak of Merrill Lynch downgraded his near-term rating rating of AMD to "neutral" from "accumulate" yesterday, hours before the chip maker's earnings warning, citing concerns of lower average selling prices -- hmmm, could there have been a leak prior to the official announcement? Kurlak lowered his first quarter earnings estimate for AMD to $0.10 from $0.18 a share and his 1999 full-year projection to a range of $0.75 to $1.00 from $1.55 a share. At the same time, he cut his 1999 forecast for Intel to $4.45 from $4.60.

To be sure, Kurlak might've predicted the bad news in such a timely manner after AMD on Wednesday confirmed it had cancelled scheduled appearances at two technology investment conferences, a move that sparked negative rumors about AMD's prospects. Intel dropped $8 9/16, or 6%, to $130 1/8 yesterday, while AMD fell $2, or 9.6%, to $18 15/16.

News to Go

Did Somebody Say IPO's?

General Motors (NYSE: GM) spin-out Delphi Automotive Systems (NYSE: DPH) yesterday priced its initial public offer of 100 million shares at $17 each, right in line with the expected range of $15 to $18. The IPO represents about 17% of the company's shares. GM plans to distribute the rest to its shareowners.

The Wall Street Journal reported that CBS Corp. (NYSE: CBS) is considering selling a part of its Internet assets, including its 38% stake in financial news provider Marketwatch.com (Nasdaq: MKTW) and its 12.5% stake in SportsLine USA Inc. (Nasdaq: SPLN), to cash in on the recent Internet mania.

Singapore-based Internet service provider Pacific Internet (Nasdaq: PCNTF), or PacNet, raised $51 million in its 3-million-share IPO, selling each share for $17 a pop, the top of the anticipated range of $15 to $17.

In Other News...

Electronics manufacturing services (EMS) provider SCI Systems (NYSE: SCI) late yesterday warned that it doesn't expect to meet earlier revenue and earnings expectations for the March and June quarters but that it expects to meet or exceed year-earlier results. For a closer look, be sure to order Dale Wettlaufer's (TMF Ralegh) Fool Plate Special for lunch today.

Satellite-to-car digital radio broadcaster CD Radio Inc. (Nasdaq: CDRD) will need to raise another $175 million before launching its service, which had been planned for April 2000. The company said it will have to pay Lucent Technologies (NYSE: LU) $27 million for the development of chips sets for its radio receivers -- that's three times the anticipated sum. CD Radio is also delaying its satellite launches, which will cost the company $50 million, and it must also pay $80 million for an additional satellite. For more on CD Radio, check out our StockTalk interview with CEO David Margolese.

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Yi-Hsin Chang (TMF Puck), Writer
Jennifer Silber (TMF Amused), Editor