updated 1/12/2007 10:03:02 AM ET 2007-01-12T15:03:02

Advanced Micro Devices Inc., the world's second-largest microprocessor maker behind much-larger rival Intel Corp., said that plunging selling prices for their computer chips hacked into the company's fourth-quarter profit.

AMD warned late Thursday that operating income for the quarter — excluding business units and charges related to newly acquired graphics chipmaker ATI Technologies Inc. — is expected to be "positive but substantially lower" than in the third quarter.

Sunnyvale-based AMD blamed the decline on "significantly" lower average selling prices in the quarter for microprocessors, which act as the core calculating engines in computers. Unit sales were up, but were offset by the falling prices, AMD said. The company did not provide details.

AMD also said that revenue for the quarter ended Dec. 31 — excluding ATI-related segments — is expected to increase about 3 percent from the $1.33 billion reported in the previous quarter.

AMD is scheduled to report its fourth quarter earnings on Jan. 23. On average, analysts have been expecting the company to earn 22 cents per share on $1.85 billion in total sales.

Some of AMD's woes in the quarter can be traced to a price war with Intel as AMD battles inch-by-inch to capture new customers and market share.

AMD has steadily stolen market share away from Intel with processors that some customers and analysts have viewed as faster and more energy-efficient than Intel's offerings.

AMD has also inked deals with once-exclusive Intel customers like computer-maker Dell Inc.

But Intel has taken dramatic steps to halt AMD's encroachment and reverse falling profits.

Intel has slashed the price on the company's older chips and introduced powerful new chips with a new design that vastly reduces energy consumption while boosting power.

In September, Intel announced a massive restructuring calling for the elimination of 10,500 positions to streamline its operations. The cuts are expected to save Intel $3 billion per year by 2008.

Copyright 2007 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.


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