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AMD Says Price Battle Led to Weaker Sales

By Reuters
Published | Updated

NEW YORK – Computer processor maker Advanced Micro Devices Inc. on Friday said third-quarter sales tumbled 22 percent from the previous period, and blamed the steeper-than-expected drop on a price war with rival Intel Corp.

``In the face of very aggressive competition, average-selling prices for PC processors declined sharply, which resulted in substantially lower revenues,'' the company said in a statement.

Sunnyvale, California-based AMD said sales for the quarter ended Sept. 30 were about $766 million, down from second-quarter sales of $985.3 million. On Aug. 29, AMD said it expected third-quarter revenues to decline by 15 percent from the second quarter.

Weaker sales will lead to a pro-forma loss of between 26 cents and 31 cents a share, AMD said. Analysts, on average, had expected a loss of 12 cents a share, according to research firm Thomson Financial/First Call.

In pre-opening trade, shares fell to $8.25 from a close of $9.00 on Thursday. In July, AMD stock traded above $30.

The warning comes as both Intel and AMD are boosting their arsenal of microprocessors -- the brains of a PC -- with faster and more power-efficient chips.

AMD, whose chips are estimated to be used in about 20 percent of PCs, is preparing to unveil its next-generation processor, the Athlon XP, as a counter to Intel's Pentium 4 chip.

Despite the broader array of chips, sales of microprocessors have become a victim to weaker demand for personal computers. PC makers Gateway Inc. and Compaq Computer Corp. warned investors this week that their quarterly results would fall short of expectations.

For its part, Dell Computer Corp., the No. 1 PC maker, surprised Wall Street on Thursday when it said it would meet analysts' profit and revenue estimates in its fiscal first quarter.

But AMD said the volume of processor shipments was not the problem, and was still at record levels. A dramatic drop in prices, it said, was to blame for weaker sales.

AMD said it expects the third-quarter to be between $90 million and $110 million, excluding one-time special charges estimated between $80 million and $110 million.

Late last month, AMD said it would cut 2,300 jobs, or 15 percent of its work force, and shutter two chipmaking plants in a bid to cut costs.