AMD announces drastic price cuts

Chipmaker has reduced semiconductor prices by up to 48 percent and is expected to report revenues that fall well below analysts' predictions

Troubled chip manufacturer AMD has announced that it has drastically cut prices for its flagship Athlon 64 X2 range.

The world's number-two chip manufacturer said on Monday that it expected a sharp decline in revenues for the first quarter of 2007. AMD blamed lower overall average selling prices and significantly lower unit sales, especially in the resale channel. AMD is involved in ongoing price competition with its main competitor Intel, although it backs away from the term 'price war'.

Andrew Buxton, a director for AMD in Europe, told ZDNet UK: "While AMD cannot speak for other companies, we anticipate continuing competitive pricing in the PC market."

The fastest Athlon 64 X2, the 6000+, is now priced at $241 (equivalent to £122) per chip — a reduction of 48 percent for the US market — only slightly more expensive than some mid-range Intel processors. AMD refused to reveal UK prices.

The company revealed plans on Monday to "restructure its business model to increase operational efficiencies and lower its operating cost structure". The company is expected to report revenues of approximately $1.225bn (£621m) for the first quarter of 2007, well under the $1.8bn (£913m) mark predicted by analysts in January.

AMD said it will reduce 2007 capital expenditure by approximately $500m (£253m). The company believes this will not have a material impact on capacity plans for the year. It added that it will limit hiring to critical positions only. The company is to provide more details during its first quarter report on 19 April.

Intel and AMD have been undercutting each other for almost 12 months on price, as Intel cleared its decks in anticipation of its Core 2 Duo processor launch and AMD followed suit to remain competitive.