The pricing war between Intel and AMD has claimed another victim – AMD’s first quarter.
The company said yesterday that its sales came in $300m shy of expectations, and that it will have to restructure its business to shave $500m off its 2007 expenses.
For the quarter ended March 31, AMD expects revenue to be $1.225bn. That’s compared to the $1.55bn that analysts polled by Thomson Financial were, on average, expecting.
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, the company said in a statement.
AMD and Intel have been fighting to the bottom rung of the pricing ladder for the last few quarters. While good for buyers, it’s not so good for the chipmakers.
AMD missed its third-quarter targets too. In January, it reported a loss that it blamed on server chip pricing pressure and its huge takeover of ATI during the year.
Intel has been hit too. In the company’s fourth quarter, reported in January, the processor market leader reported 5% slide in sales and a 39% slide in profits compared to the previous year’s quarter.
AMD is suing Intel, claiming it anticompetively prices AMD out of the market using unfair tactics, claims Intel denies.
While AMD did not reveal its earnings expectations, the obvious implication is that it will miss estimates. The company said it will take action to control costs.
The firm plans to significantly reduce discretionary expenses and limit hiring to critical positions. With this, it hopes to reduced its 2007 expenses by $500m.
More details are expected when AMD officially reports its numbers on April 19.
In the meantime, the poor performance and AMD’s sagging share price – while it was up a little yesterday it has dropped about 50% in the last six months – have started the rumor mill grinding on the notion that the company