Advanced Micro Devices, the world’s second-largest microchip maker, today confirmed that its first-quarter revenues will be hit by an ongoing price war with Intel, the market leader.

After a recent string of poor results, AMD also unveiled plans to restructure its business, including cost savings of $500 million by 2007.

According to preliminary figures, sales in the period fell 8 per cent, to $1.23 billion from $1.33 billion a year earlier. The downgrade follows a warning over sales from AMD last month.

Detailing the severity of the revenues hit, the company said in a statement today: “Revenues declined sharply quarter-over-quarter for the Computing Solutions segment, primarily due to lower overall average selling prices and significantly lower unit sales, especially in the resale channel."

The dip means AMD stand to miss Wall Street expectations – though the numbers were not as bad as some analysts had feared.

Shares in the company gained 4.1 per cent in morning deals in New York.

The stock had lost nearly 40 per cent of its value so far this year, before today, falling 10 per cent in one session in January after AMD warned on forth-quarer profits.

Intel gained 1.6 per cent in morning deals in a broadly positive New York market.

AMD company is due to report its first-quarter earnings after the markets close on April 19.

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