AMD warns of profits drop

AMD has issued a late warning to the industry that sales for the second quarter will be down 9 per cent on Q1 2006.

AMD said that it expects sales to come in at $1.215bn. Despite this figure being up an impressive 52 per cent on sales for Q2 last year, the 9 per cent fall-off comes as a surprise since AMD had previously claimed that profits would be 'flat to slightly down seasonally from the first quarter of 2006.'

The chip maker, which has seen its server market share against Intel rise swiftly in recent years thanks to its 64bit processor technology, said that sales of single, dual, and multi-socket Opteron server chips remained strong.

However, it admitted that the shortfall was down to weaker-than-expected sales of entry-level and mainstream mobile and desktop processors.

AMD will be hoping that a ground-breaking deal with Dell will boost its financial bottom line as the year plays out. The company recently sealed its first ever chip deal with Dell to supply high-end server processors but it is expected that Dell will also opt for AMD’s PC and notebook chips some time this summer.

Intel, stung by a drift of sales to AMD, is in the process of rolling out chips using a new Core microarchitecture to counter a perceived technological edge in some AMD processors. There have been predictions that a price war will break out later this month when Intel launches desktop chips, codenamed Conroe, based on this.