AMD hits Intel with new price blow

Advanced Micro Devices announced further price reductions on some of its best desktop PC microprocessors, a sign there is still no end in sight to its price war with rival Intel.

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Advanced Micro Devices announced further price reductions on some of its best desktop PC microprocessors, a sign there is still no end in sight to its price war with rival Intel.

It is great news for users, who have been treated to improved microprocessor technology and better deals over the past year, as the two giants slug it out. Signs that the price war was cutting into profits at the two companies had given rise to fears that the intense competition may be nearing an end, but the AMD move indicates that this is not the case.

AMD slashed prices on its top of the line desktop PC microprocessors from $999 (£500) to $799 (£400) for a pair of 3GHz Athlon 64 FX-74 chips and $799 (£500) to $599 (£300) for a pair of 2.8GHz Athlon 64 FX-72 chips, in its previous price list from January 22. The company also reduced the price of some of its best dual core processors, the Athlon 64 X2 5600+, which runs at 2.8GHz, to $241 (£120) each, from $505 (£250), and the Athlon 64 X2 5200+, to $188 (£195) from $295 (£150).

In addition, AMD lowered three of its dual core offerings for the desktop to below $100 (£50) each.

And the new price list shows AMD is not about to back down in this price war despite the obvious impact to its finances.

Sunnyvale warned it expects to report revenue of $1.23bn (£600m) for the quarter ending March 31, 2007, down from its prior forecast of between $1.6bn (£800m) and $1.7bn (£835m). AMD blamed low average selling prices for the downturn, yet another sign the price war with Intel is causing financial pain. The revised revenue figure represents AMD's worst since the second quarter of last year, when it reported revenue of $1.22bn (£600m), a time when it did not include the merged ATI graphics business with its results.

Both Intel and AMD have reported worse finances as a result of their market share battle. Intel's revenue in the fourth quarter of last year fell 5% year-on-year to $9.7bn (£4.8bn), while its net profit plummeted 39% to $1.5bn (£750m). AMD said its revenue in the fourth quarter was $1.37bn (£700m) excluding the ATI operations, with operating income of $63m (£31m), down from operating income of $272m (£135m) a year earlier.

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