AMD lowers Q2 sales estimate, blames PC processors

The world's second largest microprocessor maker, which squares off with Intel Corp., lowered its second quarter sales forecast to US$1.215 billion, around 9 percent lower than its original target. AMD's prior guidance called for sales to be flat to slightly down from the first quarter of 2006 due to the normal slowdown in the PC market during the second quarter.

The sales revision wasn't completely unexpected. There have been a number of signs that PC sales have fallen off ahead of anticipated price reductions by Intel. The price of DRAM (dynamic RAM) chips, for example, fell in June. Component vendors and analysts in Taiwan widely expect Intel to slash processor prices in July, the start of what many expect to be a price war with AMD. The microprocessor is one of the most expensive parts inside a PC, so price reductions could have a big impact on the price of an overall system.

Taiwanese companies often know inside information about the PC industry, such as about upcoming chip launches or price reductions, because they make many vital components for PCs and need to know about upcoming technical or business changes in order to prepare new products.

In one bright spot of news for AMD, the company said it posted record high sales of Opteron processors in the second quarter thanks to strong demand for the chips in servers and workstations. The announcement is particularly noteworthy because it comes shortly after Dell Inc. announced it would start using Opteron processors in its high-end, multiprocessor servers by the end of the year.

In May, Dell surprised the PC market by announcing the move, breaking from its Intel-only modus operandi for the first time ever.

AMD's second quarter ended July 2, and the company will formally report its earnings results on Thursday, July 20.