AMD Finds Big Time Tough

Advanced Micro Devices(AMD Quote) fought for years to put its chips inside Dell(DELL Quote) PCs. Now it's being stung by its ascent into the big leagues.

With first-quarter sales now expected to lag initial forecasts, AMD CEO Hector Ruiz ascribed the shortfall to problems in adapting to the rapid shift in the profile of its customers.

Essentially, explained Ruiz at the Morgan Stanley Technology conference Monday in San Francisco, AMD neglected its traditional base of channel customers -- a catch-all term that includes regional PC resellers and makers of "white box" systems -- in favor of top-tier PC makers.

The problem is that the top-tier PC makers, or original-equipment manufacturers, saw less demand than initially expected, and AMD was unable to recoup the sales shortfall from its channel customers.

"We took a risk on how we shifted our capacity to serve our customers, and unfortunately some of our customers were not able to meet those very aggressive growth rates they had," Ruiz said.

According to AMD, the company is "unlikely" to meet its first-quarter revenue estimate of $1.6 billion to $1.7 billion.

Analysts polled by Thomson Financial were looking for AMD to report $1.66 billion in sales with a loss of 25 cents a share.

The announcement sent AMD shares to fresh 52-week lows -- the stock finished Monday's regular session down 1.6%, or 23 cents, at $13.95.