AMD issues revenues warning

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Advanced Micro Devices, the number-two PC microprocessor maker, issued its second warning of the year on Monday blaming weaker than expected demand for computers.

AMD said it was unlikely to meet its previously estimated revenue guidance of $1.6bn-$1.7bn in the first quarter.

Its shares, which have lost two-thirds of their value in the past year, were down 2 per cent in midday trading in New York, hitting a new low of $13.89. They fell more than 10 per cent in January after the number-two maker of processors for PCs warned of substantially lower fourth-quarter profits caused by a price war with its larger rival Intel.

Average selling prices for microprocessors have fallen significantly for AMD, which announced gross margins had dipped to 40 per cent in the fourth quarter, compared with 52 per cent in the third quarter and 57 per cent a year earlier.

Hector Ruiz, AMD chief executive, told a Morgan Stanley technology conference in San Francisco on Monday: “The pricing environment is very competitive.”

But Mr Ruiz blamed PC manufacturers such as Hewlett-Packard and Dell for the fresh warning. He said they had been over-aggressive in estimating demand, leaving chips on AMD’s hands that it did not have time to switch and sell to other buyers.

The chip industry as a whole appears to be experiencing some weakness in the early part of 2007, according to January sales figures released on Monday by the Semiconductor Industry Association trade body.

Worldwide sales of $21.47bn were 9.2 per cent higher than a year earlier, but were down 1.2 per cent from the $21.74bn reported in December.

“January semiconductor sales reflected historical seasonal patterns, with strong year-on-year sales growth coupled with a modest sales sequential decline,” said George Scalise, SIA president.

Joe Osha, Merrill Lynch semiconductor analyst, said the statistics showed unit growth was still weakening. “We continue to believe Q1-07 will mark the trough on a year-on-year basis in both revenue and units,” he said in a note.

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