AMD expecting bleak first quarter
Processor price war starts to take its toll on chip manufacturer
AMD is planning a major restructure of its business in anticipation of bleak first-quarter financial results.
The chip manufacturer has been engaged in a vicious price war with Intel since last year and the firm’s revenues have taken a significant hit as a result. AMD has warned the market that it expects Q1 revenues of about $1.22bn for the period ending 31 March 2007, which is far below previous predictions of $1.6bn to $1.7bn.
The news has sparked some drastic cost-cutting measures, including the implementation of a partial hiring freeze. AMD also wants to cut its capital spending by up to $500m, but as CRN went to press there remained no news on whether AMD planned to make redundancies as part of the cost-cutting exercise.
The company said in a statement: “Revenues declined sharply quarter-over-quarter for the computing solutions segment, primarily because of lower overall average-selling prices and significantly lower unit sales.
“AMD plans to restructure its business model to increase operational efficiencies and lower its operating cost structure. We will reduce 2007 capital expenditures by about $500m, which the firm believes will not materially impact capacity plans for the year. AMD will also significantly reduce discretionary expenses and limit hiring to critical positions.”
However, rival Intel has launched more high-performance quad-core processors in an effort to dislodge AMD as the vendor of choice for PC enthusiasts and gamers.
The company has introduced the Intel Core 2 Extreme processor QX6800, its 12th quad-core processor and the fastest one to date with a native clock speed of 2.93GHz. Intel used the recent Game Developer’s Conference in San Francisco to showcase the chip.
Intel claimed the quad-core QX6800 is up to 65 per cent faster than the dual-core X6800 for video encoding. The chip is produced using Intel’s 65 nanometer process and comes with a 8MB cache and a 1066MHz system bus.
Eric Kim, senior vice-president at Intel’s digital home group, said: “This translates to user benefits such as better gameplay with more intelligent computer-generated opponents and less waiting time for demanding high-definition media editing.”