AMD profits hit by processor price slump

AMD has warned its holiday sales and profits fell short of its expectations, putting the blame on falling PC processor prices.

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

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

Analysts had been expecting AMD to report revenue of $1.85bn and per-share profits of 22 cents, according to Thomson Financial.

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

A company representative declined to comment further, saying it would have more to say when it reports full fourth-quarter profits on 23 January.

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

Ina Fried writes for CNET News.com