AMD Takes a Hit in Price Wars

AMD today released estimates of second quarter earnings that included both good and bad news.

The feisty chipmaker said it expects sales to be approximately $1.215 billion, or 52 percent higher for the upcoming quarter compared to the same quarter a year ago.

The bad news? Sales are down nine percent from the previous quarter; AMD  had earlier projected that sales for Q2 would be flat to slightly down.

An AMD spokesman refused to comment on reasons for the decline but said more details would be forthcoming in an earnings call July 20.

Part of the reason for the decline likely lies in the ongoing price wars with top chipmaker Intel; the rivals regularly lower chip prices to stimulate sales.

Intel  is in the midst of a top-to-bottom review of company operations as it seeks to regain market share lost to AMD, primarily in the server and consumer desktop space.

Intel said its PC manufacturing customers have had inventory build up that’s resulted in price drops, particularly at the lower end of the market, where PC prices have dropped well below $500.

AMD has matched some of Intel’s price cuts, which has hurt its bottom line revenue.

In other preliminary details for Q2, AMD said that a big driver of its sales were its Opteron processor for both servers and workstations. AMD said sales of entry-level and mainstream mobile and desktop processors were down.

Intel recently rolled out a major upgrade to its Xeon processor, code-named Woodcrest, which is expected to be a stronger competitor to Opteron.

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