AMD Issues Revenue Warning; Restructuring Looms

 |  Includes: AMD, INTC
by: Larry Dignan

Felled by pricing pressure from Intel (NASDAQ:INTC), Advanced Micro Devices (NYSE:AMD) said its first quarter sales will fall well short of Wall Street estimates.

AMD said revenue for the first quarter ending March 31 is expected to be $1.22 billion. According to Thomson Financial, Wall Street is expecting revenue of $1.55 billion.

The chipmaker said in a statement:

Revenues declined sharply quarter-over-quarter for the Computing Solutions segment, primarily due to lower overall average selling prices and significantly lower unit sales, especially in the resale channel.

AMD's shortfall wasn't entirely unexpected since the company said in March that its first quarter was weak. Following the company's fourth quarter results, some analysts asked whether AMD's business model was fundamentally broken.

To fix its issues, AMD said it plans to restructure to cut capital expenses by about $500 million. However, the company said the restructuring won't "materially impact capacity plans for the year." AMD also noted that it will "significantly reduce discretionary expenses and limit hiring to critical positions."

The company said it will provide more details on its restructuring when it reports earnings April 19. Ahead of AMD's warning, analysts were expecting a loss of 30 cents a share.

AMD's revenue warning may indicate that the company is increasingly having trouble competing with Intel, which has more scale and a new processor cycle. Meanwhile, AMD has increasingly looked as if it is reaching on benchmark data (see gallery) to look competitive with Intel, which has also had its data questioned. David Berlind and George Ou have been reporting on the Intel vs. AMD issues in recent weeks.

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