NEW YORK (CNN/Money) -
Advanced Micro Devices Inc. said Wednesday that it missed its third-quarter revenue target by a wide margin, logging sales of roughly $500 million during the period.
At last count, 12 analysts polled by earnings tracker First Call had expected revenue closer to $614.1 million. During last year's third quarter AMD reported revenue of $765.9 million.
Because of the revenue miss, AMD (AMD: Research, Estimates) said it expects to report "a substantial operating loss for the quarter." It did not provide a specific per-share estimate.
However, Wall Street already had expected a fairly substantial loss for the quarter. The most recent First Call consensus estimate was for a loss, excluding one-time charges, of 49 cents per share. That would have compared with 28 cents per share a year earlier.
AMD (AMD: Research, Estimates) is a major supplier of microprocessor chips for personal computers as well as flash memory chips used in a range of electronics such as digital cameras and music players. It ranks a distant second to Intel Corp. (INTC: Research, Estimates) in both those markets.
Executives of AMD in Sunnyvale, Calif., said the company's flash memory business is improving and showed sequential sales growth for the second consecutive quarter. They blamed the third-quarter's shortfall on continued weakness in demand for PCs.
"In the absence of any significant improvement in PC demand in the just completed quarter, we accelerated our efforts to reduce processor inventory in the PC supply chain," Robert J. Rivet, AMD's chief financial officer, said in a statement.
The actions the company took to lower inventories had a significant negative impact on third quarter processor sales in units, revenue and average selling prices, Rivet said.
He also suggested that the proportion of demand for low-end processors had been greater than expected, saying that efforts to "align the mix with current opportunities" had contributed to the shortfall as well.
Many industry observers have pointed out recently that there has been a shift in demand away from computer systems powered by high-end processors such as Intel Pentium 4 or AMD's Athlon XP, and toward machines with less expensive chips such as Intel's Celeron and AMD's Duron.
While downplaying its significance, Intel executives early last month acknowledged the shift in demand when they narrowed their revenue and profit targets for the quarter.
Shares of AMD slid 15 percent to $4.59 in extended-hours trade Wednesday. The stock rose 1.9 percent to $5.37 in New York Stock Exchange trade ahead of the news, which was released after the closing bell.
The stock bucked a broader downturn in the tech sector Wednesday after the company unveiled its fastest microprocessors yet, which it hopes will help close a performance gap between its high-end products and Intel's. Systems powered by the new chips are expected to be available in November, in time for the holiday buying season.
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