(Reuters) - Advanced Micro Devices Inc AMD.N shares fell 11 percent in early trading after the chipmaker forecast a steeper-than-expected fall in quarterly revenue, prompting at least two brokerages to cut their price targets on its stock.
Weak PC sales, tough competition from Intel Corp (INTC.O) and a drop in revenue from gaming consoles after a strong holiday season were responsible for the weak forecast, analysts said.
Canaccord Genuity cut its price target to $5 from $6, while FBR Capital Markets lowered its by 50 cents to $5.50.
"Once again AMD has dashed the hopes of the believers," Bernstein Research analyst Stacy Rasgon wrote in a report.
"The quarter's results again reiterated serious concerns over the health of AMD's core PC business, which appears to be collapsing."
AMD said after the market close on Tuesday that it expected revenue to fall 16 percent, plus or minus 3 percentage points, in the first quarter, compared with the fourth quarter ended December 28.
At the midpoint, this would work out to revenue of about $1.34 billion. Analysts on average were expecting revenue of $1.36 billion, according to Thomson Reuters I/B/E/S.
AMD's sales of chips for PCs fell 13 percent in the fourth quarter. The business accounted for more than 45 percent of the company's total revenue of $1.59 billion in the quarter.
Like larger rival Intel, AMD has been trying to refocus its business as sales of laptops languish and consumers increasingly depend on smartphones and tablets.
While AMD has gained in gaming consoles, Intel is taking away its market share in the PC chip business, analysts said.
"AMD is primarily exposed to the low-end consumer PC segment, with very little exposure to the corporate PC segment, which strengthened in 2H13," JPMorgan analyst Christopher Danely said in a note.
AMD's stock had risen 24 percent in the three months up to Tuesday's close.
Reporting By Lehar Maan and Supantha Mukherjee in Bangalore; Editing by Ted Kerr