AMD expects much lower first-quarter revenue

— 9:27 AM on April 9, 2007

Back in January, AMD posted revenue of $1.77 billion for the fourth quarter of 2006 and said it expected revenue of $1.6-1.7 billion for the first quarter of this year. Then, in March, the chipmaker issued a revenue warning saying it was "unlikely to meet" its first-quarter guidance. AMD has now revealed the extent of the damage, and its revenue warning seems like a bit of an understatement. For the first quarter of 2007, AMD expects revenue of just $1.225 billion—a staggering 30.8% drop from the previous quarter.

Furious price cuts and competition from Intel are the obvious culprits for the slip. "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 explains.

To counteract the drop, the chip maker says it plans to "restructure its business model to increase operational efficiencies and lower its operating cost structure." Capital expenditures for 2007 should drop by $500 million, AMD notes, although that decrease shouldn't materially hurt its capacity plans. AMD also intends to reduce discretionary expenses and hire new staff only for critical positions. More details will be revealed during AMD's first-quarter financial results announcement conference call on April 19, the firm says.

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