As if it weren't bad enough that

Advanced Micro Devices'

(AMD) - Get Report

revenue will come in up to 31% below expectations, the chipmaker said in a conference call that it also was likely to lose market share this quarter.

There's a risk those share losses could continue later in the year, as AMD contends with a triple whammy of lousy demand, intense pricing pressure from rival

Intel

(INTC) - Get Report

, and a likely wait of at least six months before its newest line of processors, the Hammer, makes a contribution to the company's income statement.

Following on last year's market gains, in the first quarter of 2002 AMD had added another 0.6% to its share of the worldwide personal computer market, at 18.6%, while Intel lost 0.8% to 78.7%, according to Gartner Dataquest.

But during Tuesday's call, CFO Robert Rivet acknowledged the company likely was to give back some of those gains for the quarter ending in June.

"Between product cycles, their competitive positioning is going to be worse as the year progresses," predicted Prudential Securities analyst Hans Mosesmann. Prudential doesn't do investment banking for AMD or other companies.

"Most of this year is going to be tough," he said. "

AMD might stabilize market share numbers, but at the expense of ASPs

average selling prices."

The problem, AMD's CFO said in the conference call, is that the company is "not as competitive at the high end" in the desktop market, which offers better margins.

Sales of high-end chips have been under pressure amid a weak economy. Part of the reason Intel's revenue will fall short this quarter is that the company sold fewer of its pricier Pentium 4 chips than it expected, relative to lower-priced Celeron chips.

Nevertheless, AMD's orientation toward relatively lower-priced chips has the effect of depressing its ASPs. In the first quarter, AMD's ASP was $85, vs. an ASP for Intel of somewhere around $150, estimated Needham analyst Dan Scovel. In a research note on AMD, Needham's disclosure said it may have done banking for the company.

Compounding the problem, AMD was forced to respond to Intel's aggressive price discounts by pushing through its own price cuts in April and May.

Scovel said he's waiting to gauge the extent of the share loss this quarter. "If it's not more than 100 basis points, I'm not going to worry. If it's more than that and it seems to stick, then it's a problem."

One trend in AMD's favor is, relative to Intel, its chips are more oriented toward consumer products, for which demand tends to strengthen in the second half.

"The consumer ramps up heavily in the third and fourth quarter for the back-to-school and Christmas seasons," said Lehman analyst Dan Niles. He also said those trends could help AMD share going forward. Lehman has not recently done banking for AMD.

Of course, while market share is a useful metric to keep tabs on, earnings ultimately hinge on the price at which a company can sell its goods. In the positive column, there's reason to expect that AMD's ASPs will rise over the next several quarters as it continues to build on last year's introduction of the Athlon processor for the portable PC and low-end server market.

"If you can have a richer mix of portable PC shipments and low-end servers, and a mix that's richer in high-end desktops, you'll

sell more expensive parts. So you're able to make more money even though you're not selling more parts," said Scovel.

Also, while Intel's current edge in processing power allows it to call the shots in pricing, that dynamic is likely to change when AMD rolls out its Hammer line of processors, intended to compete with Intel's Pentium 4 and Itanium chips. Preliminary feedback on the processors has been positive, according to the company.

AMD's Hammer line is scheduled to start shipping at the end of the year, but it won't have a financial impact until at least the first quarter of next year. And there's always the risk of delays with complicated new semiconductor launches.

Either way, AMD's goal of breaking even has been delayed, in line with the continuing pushout of the IT spending recovery.

"We were almost there in the first quarter of '02," the company's CFO said in its conference call Tuesday. "It was washed away with the significant drop in demand."

In the first quarter, the company reported a loss of $9 million, or 3 cents per share, according to GAAP.

But for the second quarter, analysts have dramatically lowered their estimates and now expect a loss of 36 cents, according to Thomson Financial/First Call. That compares with a consensus estimate of a loss of 9 cents before AMD announced the shortfall.