AMD pressure intensifies as revenue falls short; restructuring looms

Summary:Felled by pricing pressure from Intel, Advanced Micro Devices 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.

Felled by pricing pressure from Intel, Advanced Micro Devices 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.  

Topics: Processors

About

Larry Dignan is Editor in Chief of ZDNet and SmartPlanet as well as Editorial Director of ZDNet's sister site TechRepublic. He was most recently Executive Editor of News and Blogs at ZDNet. Prior to that he was executive news editor at eWeek and news editor at Baseline. He also served as the East Coast news editor and finance editor at CN... Full Bio

zdnet_core.socialButton.googleLabel Contact Disclosure

Kick off your day with ZDNet's daily email newsletter. It's the freshest tech news and opinion, served hot. Get it.

Related Stories

The best of ZDNet, delivered

You have been successfully signed up. To sign up for more newsletters or to manage your account, visit the Newsletter Subscription Center.
Subscription failed.