AMD estimates weak sales, to cut 10 percent of jobs

By Philipp Gollner

SAN FRANCISCO (Reuters) - Advanced Micro Devices Inc (AMD.N: Quote, Profile, Research, Stock Buzz) said on Monday it would cut 10 percent of its work force, or about 1,680 jobs, and gave a first-quarter revenue estimate below expectations, sending its shares down as much as 5 percent.

Citing lower-than-expected sales across its business, AMD estimated revenue for the quarter ended March 29 at about $1.5 billion, well below the average analyst forecast of $1.62 billion, according to Reuters Estimates.

Analyst Ashok Kumar of CRT Capital Group said a weakening economy and tough competition from larger rival Intel Corp (INTC.O: Quote, Profile, Research, Stock Buzz) were causing AMD's revenue shortfall. AMD's estimate would be a 22 percent rise in revenue from the year-ago period, but a 15 percent drop from the fourth quarter.

"Demand is weak because of the economy. And then there's some (market) share loss that has contributed to the greater-than-expected shortfall," said Kumar, adding that analysts had expected a 7 percent sequential drop in revenue.

AMD, the second-largest maker of computer processors, lost market share last year as its chip-making technology lagged Intel's. Intel ended 2007 with a 79 percent revenue share of the microprocessor market and AMD with 13 percent, according to market researcher iSuppli.

But Intel has also issued its own warning about the first quarter. In early March, Intel cut its gross margin forecast, citing weaker pricing for NAND memory chips used in consumer electronics, such as digital music players and cell phones.

Intel is scheduled to report results on April 15 and AMD on April 17.

AMD lags currently lags Intel in chipmaking technology and could be about nine months behind Intel when it introduces chips with elements as small as 45 nanometers in the second half of 2008. A nanometer is a billionth of a meter.