Price war leaves AMD struggling

AMD's ongoing price war with Intel is taking its toll; the chipmaker is restructuring its operations and freezing recruitment as Q1 revenues fell below expectations.

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By  Administrator Published  April 19, 2007

AMD's ongoing price war with Intel is taking its toll; the chipmaker is restructuring its operations and freezing recruitment as Q1 revenues fell below expectations.

In a statement released last week, the world's second largest manufacturer of microprocessors warned its fiscal 2007 first quarter sales would be down 30% on the previous quarter, to US$1.23 billion; missing analysts' expectations by around US$300million.

"Revenues declined sharply quarter-on-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 said in a statement.

The vendor said it now planned to cut capital expenditure by around US$500million this year through restructuring its business model and lowering its operating cost structure. AMD said it would also reduce discretionary expenses and limit hiring to only critical positions.

The company will provide more details on its Q1 results later today (April 19) when it holds a conference call to report its earnings.

The poor figures are yet another sign of the impact the price war has had. Sales in Q1 were also down on the same period a year ago; the third consecutive quarter AMD's sales have declined year-on-year.

Intel has also been hit by the price war. The vendor's profits plummeted 40% in its 2006 fiscal Q4.

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