AMD to Tell Us Where It Hurts

Desktops and notebook chips are the big wild card, though, and any signs that AMD gained share in these two categories -- despite fielding a chip lineup that has become long in the tooth compared with that of Intel -- will be an encouraging sign for AMD bulls.

The price of any market share gains will be reflected in AMD's gross margin, which is expected to show signs of stress and remain short of the company's goal of reverting to the 55% to 60% level.

In its preannouncement earlier this month, AMD said its gross margins were hurt by significantly lower prices.

In the third quarter, AMD's gross margin declined to 51.4% because of price competition as well as growing pains it attributed to working with a new set of larger customers, such as Dell(DELL Quote).

John Lau, an analyst at Jefferies & Co., which has received noninvestment banking compensation from AMD in the past 12 months, expects "substantial margin erosion as the company attempts to remain competitive."

Indeed, Lau's EPS estimate of 2 cents is significantly lower than the average expectation on Wall Street of 10 cents.

Analysts polled by Thomson Financial expect AMD's fourth-quarter sales to total $1.73 billion, including contributions from the recently acquired graphics-chip maker ATI.