AMD warns on revenue, stock falls

Shares of No. 2 chipmaker fall nearly 2 percent after company says it's unlikely to meet previous first-quarter revenue guidance of $1.6 to $1.7 billion.

By Rob Kelley, staff writer

NEW YORK ( -- Advanced Micro Devices, the world's second-largest chipmaker, warned Monday that it is unlikely to meet its previously estimated revenue guidance of $1.6 to $1.7 billion for the first quarter.

Shares of AMD (up $0.28 to $14.23, Charts) fell 1.6 percent in trading Monday.

The announcement comes more than a month after AMD reported that earnings were down substantially in the fourth quarter of 2006, as the company's chip price war with Intel took a toll on its profits. (Full story)

The company's weakness in the fourth quarter was due to a loss of some business with computer resellers, CEO Hector Ruiz told analysts at the Morgan Stanley Technology Conference on Monday.

AMD, said Ruiz, had experienced so much growth in sales from Dell (Charts) and other computer manufactures, or Original Equipment Manufacturers (OEMs), that it had neglected resale customers.

"We saw a fairly dramatic shift [toward] most of our growth coming from OEM, and we had a hard time getting the mix [between resellers] and OEM right," he said. "We need to fix the challenge we created in the fourth quarter with our [computer resale] partners."

But Ruiz sought to reassure investors, telling conference attendees that he expects the revenue decline to be an isolated event.

Without providing specifics, Ruiz said the company is addressing the resale customer problem now. He also reaffirmed AMD's long-term gross margin guidance of 50 percent.

In January, Intel announced fourth-quarter earnings that were 39 percent lower than the year-ago period. (Full story)

Shares of Intel (Charts) closed at $19.22 on Friday.

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