SAN FRANCISCO – Chipmaker Advanced Micro Devices Inc. posted a surprise quarterly loss on Tuesday as a price war with Intel Corp. took a heavier than expected toll, driving shares down more than 5 percent.
AMD also said its gross margin took a big hit in the fourth quarter due to falling prices for server processors, and it gave a revenue forecast for the first quarter that was short of Wall Street expectations.
Costs related to its $5.4 billion purchase of graphics chip maker ATI also weighed on results.
“The acquisition was an expensive proposition that took a toll on AMD’s fourth-quarter numbers,” said JoAnne Feeney, managing director of FTN Midwest Securities.
“But one should not ignore the obvious increasing competition from Intel that lowered average selling prices and stopped AMD from gaining further share.”
AMD’s net loss for the fourth quarter ended December 31 was $574 million, or $1.08 per share, compared with a profit of $96 million, or 21 cents a share, a year earlier.
The results included special items such as a $550 million charge related to its purchase of ATI.
After adjusting for those charges, AMD lost 4 cents per share, while the average Wall Street forecast for a profit of 8 cents per share, according to Reuters Estimates.
Revenue was $1.77 billion, compared to $1.84 billion a year earlier, and slightly ahead of the $1.74 billion average Wall Street forecast.
“We believe we once again gained microprocessor unit share in the quarter,” Chief Financial Officer Robert Rivet said in a statement.
Gross margin fell to 40 percent from 52 percent in the previous quarter and from 57 percent a year earlier.
The company said that it expected first-quarter revenue to be between $1.6 billion and $1.7 billion, shy of the $1.8 billion expected by analysts.
“I suspect AMD is anticipating both a seasonal decline in unit sales and continued fierce competition with Intel that will pressure (prices),” Feeney said.
AMD, the No. 2 maker of PC processors behind Intel, said earlier this month that quarterly revenue would fall short of Wall Street expectations and that operating profit would fall from the third quarter, citing lower prices for its chips.
Shares in AMD have fallen more than 50 percent over the past year as investors grow concerned that its market share gains against Intel have stalled. The stock trades at 13 times expected 2008 profit, compared to 15.6 times for Intel.
Shares in AMD fell 5.3 percent in extended trading to $16.58 after the results were announced.