January 11, 2007 5:27 PM PST

AMD warns of disappointing fourth quarter

Blaming falling PC processor prices, Advanced Micro Devices has warned that its holiday sales and profits fell short of its expectations.

In a statement late Thursday, the chipmaker said that it would report positive operating income for the fourth quarter but that profit would be "substantially lower" than in the prior quarter.

Fourth-quarter revenue, excluding its recently acquired ATI Technologies graphics business, increased about three percent from the $1.33 billion reported in the third quarter, AMD said. That's less than the "seasonally strong" fourth quarter that the company had predicted.

Analysts had been expecting the Sunnyvale, Calif.-based company to report revenue of $1.85 billion and per-share earnings of 22 cents, according to Thomson Financial.

AMD said that that its margins and profits were hit by "significantly lower microprocessor average selling prices" which dampened "a significant increase in unit sales."

An AMD representative declined to comment further, saying the company would have more to say when it reports full fourth-quarter earnings on January 23.

CNET News.com's Tom Krazit contributed to this report.

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