Price War Still Punishing AMD

Shares hit 52-week lows after another revenue warning.
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Advanced Micro Devices

(AMD) - Get Report

shares slumped to fresh 52-week lows on Monday, after the chipmaker warned the Street that it was unlikely to hit its first-quarter sales expectations.

The warning, AMD's second in a row, is the latest sign of stress as AMD and

Intel

(INTC) - Get Report

continue to wage a fierce price war that has taken a toll on each company's financials and stock price.

Shares of AMD were down 41 cents, or 2.9%, to $13.75 in recent trading Monday.

In a statement Monday morning, AMD warned the Street that it was 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.

CEO Hector Ruiz is slated to provide more details on the miss at a presentation at the Morgan Stanley Technology conference Monday.

Of key interest to investors will be how AMD's gross margins are faring in the current quarter, as well as the average selling prices for its various types of microprocessors.

Last quarter, AMD reported a $574 million loss on charges from its acquisition of graphics chipmaker ATI. Particularly worrisome to investors was the

surprise drop in AMD's gross margins to 40%, despite management's contention a few weeks earlier that the company was on track for 50% margins in 2007.

The company blamed flat server chip sales and declining average selling prices of server processors for the fourth-quarter miss. While rival Intel has recently refreshed its entire line of chips and is currently shipping a quad-core server processor, AMD isn't expected to release its quad-core chip, dubbed Barcelona, until mid-2007.

Ruiz will likely provide investors with an update on the Barcelona chip at Monday's conference, as well as other technology initiatives at AMD, such as integrating graphics processing capabilities directly into its microprocessors.

Despite AMD's suffering financial performance, the company continues to win market share thanks to new deals with top-tier PC makers such as

Dell

(DELL) - Get Report

. In the fourth quarter, AMD's overall share of the x86 microprocessor market

rose to 25%, its highest level ever.