AMD Profit Margin Hit By Intel Price War

Advanced Micro Devices, the No. 2 maker of personal computer processors, reported Wednesday that its profit margin took a hit in its most recent quarter because of its price war with Intel. Some investors are concerned the two rivals will wage another bruising price battle in the upcoming all-important fourth quarter or next year

The Sunnyvale company's stock fell sharply in trading after the stock market closed Wednesday, as investors mulled over AMD's lower gross profit margin. Its shares tumbled 9.2 percent in after-hours trading, falling $2.11 to $22.12. Earlier, its shares closed down 25 cents at $24.23 during regular market hours, before its earnings were announced.

In the past two quarters, according to Mercury Research in Cave Creek, Ariz., AMD has gained market share. Intel has been fighting back with its new Core Duo product family and lowering prices on older chips, such as the Pentium 4. Intel says it is turning around. Tuesday, Intel reported a 35 percent drop in net income, but its results surpassed Wall Street's estimates. Intel Chief Executive Paul Otellini told analysts that with its new PC and server chips, it gained share during the quarter.

AMD said it expects demand for its products to be strong in the fourth quarter and sales to increase from the third quarter.

View: Full Article @ Mercury News

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