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Advanced Micro Devices, the number-two microprocessor maker, sank to a $574m loss in its fourth quarter and saw its gross margins fall to 40 per cent as it absorbed the graphics chip maker ATI and engaged in a price war with its rival Intel.
AMD said it believed it had once again gained market share from Intel in terms of units shipped, but average selling prices were significantly lower than it had previously achieved.
Its shares fell more than 5 per cent in after-hours trading to $16.60.
Intel said last week it had achieved higher selling prices with a new line of microprocessors in the fourth quarter. But it disappointed the market in predicting gross margins of only 50 per cent in 2007 as it competed on price with AMD and invested in new manufacturing processes.
AMD reported revenues rose 3 per cent on the prior quarter to $1.37bn, excluding ATI revenues. This was in line with a warning earlier this month.
AMD said yesterday $550m of its loss was related to the acquisition and integration of ATI, the Canadian chipmaker bought for $5.4bn in October, and it had incurred $27m in stock-based compensation expenses.
Gross margins of 40 per cent compared with 52 per cent in the third quarter and 57 per cent in the fourth quarter of 2005.
“We are not satisfied with our financial performance in the fourth quarter and we need to improve our results in the future,” Dirk Meyer, AMD president, told an analyst conference call.