AMD Braces For Q1 Earnings Hit

AMD  today said it expects to report revenue of approximately $1.225 billion for the first quarter and plans to cut costs by $500 million in 2007.

Analysts polled by Thomson Financial had expected AMD to garner at least $1.55 billion in sales.

AMD in a statement attributed the shortfall to “lower overall average selling prices and significantly lower unit sales” from its computing solutions group, which encompasses desktop PCs, laptops, workstations and servers.

Competition is fierce in this segment, with top chipmaker Intel  and AMD struggling to outdo each other both by selling computer makers faster chips with more memory at more attractive prices.

To become more nimble, AMD said it plans to restructure its business model to lower operating costs. The company expects to reduce capital expenses by $500 million for the year without impacting chip production. AMD will also limit hiring to critical positions.

AMD plans to post Q1 2007 financial results and further detail its cost-cutting in a conference call after the market close on April 19.

Wall Street was fairly upbeat about the warning Monday morning, sending AMD shares to $13.33, or 47 cents higher than its Friday closing price of $12.86.

The latest warning comes after AMD warned in March that it will miss Wall Street sales estimates of $1.66 billion for Q1 because the company has had trouble supplying resellers.

AMD made a similar pronouncement about income for Q4 and later posted revenue of $1.77 billion.

AMD officials have pointed to the future and are bullish on what they said are the performance efficiency advantages of the Barcelona quad-core server processors it plans to ship this summer.

Intel meanwhile beat AMD to the punch by shipping its Clovertown quad-core chips last November.