AMD Finds Big Time Tough

While Ruiz said the company was undergoing a quarter or two of "adjustments," the CEO said he was confident that the second half of the year would be strong, with AMD releasing its long-awaited quad-core processor for servers and desktop PCs.

"We think we're going to have a significant opportunity to distance ourselves from the competition," Ruiz said, noting that the performance and energy efficiency of its forthcoming Barcelona processor could bring about a 30% to 40% improvement over its current products.

Overall unit demand for microprocessors looks good for the rest of the year, Ruiz said. "So other than this first-quarter unit glitch, as we're trying to move from OEM to distribution, we feel very good."

Ruiz did not name any particular OEMs for the demand shortfall. Of course, with Hewlett-Packard's(HPQ Quote) PC and industry standard server business both posting strong growth recently, the problem would appear to lie more with Dell, which reported a year-on-year sales decline last week.

Dell began offering PCs with AMD processors last year, ending a practice of offering only Intel(INTC Quote)-based systems.

"Given the fact that Dell has had a shortfall, it would make sense that Dell probably wasn't hitting the volumes" that AMD was counting on, says Stifel Nicolaus analyst Cody Acree.

But Acree believes AMD's troubles aren't solely linked to Dell. Both Dell and H-P appear to be demanding steep discounts on processors prices, says Acree. And the so-so release of Microsoft's(MSFT Quote) Vista operating system is also not helping things.