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AMD 2Q Profit Rises as Revenue Dips

Computer chip maker Advanced Micro Devices Inc.'s second-quarter profit rose sharply but sales dipped as it struggled amid the aggressive price cuts of larger rival Intel Corp.

For the three months ended July 2, AMD earned $88.8 million, or 18 cents per share, up from $11.3 million, or 3 cents per share, in the same quarter of 2005. Revenue was $1.22 billion, down from $1.26 billion last year, the company said Thursday.

AMD shares fell nearly 6 percent on the news.

Last year's profit was depressed by its unprofitable flash memory business, which was spun off late last year.

Analysts surveyed by Thomson Financial expected AMD to report, on average, earnings of 22 cents per share on $1.25 billion in revenue.

Earlier this month, the company warned it expected $1.22 billion in revenue. Previously, the company projected second-quarter sales to be flat or down slightly from first-quarter revenue of $1.33 billion.

Looking forward, the company said it expects demand to be "seasonally strong" in the second half of the year, and it is looking for a sequential rise in third-quarter sales. Analysts expect the company to report, on average, $1.34 billion in third-quarter sales.

"We are dissatisfied by not reaching our second-quarter sales target," said Robert Rivet, AMD's chief financial officer.

Competition is heating up as Intel has dramatically cut prices and is releasing new microprocessors that are expected to be more competitive with AMD's chips for both servers and personal computers.

On Wednesday, Intel reported results that also reflected the tough environment. Its net income for the period was $885 million, down 57 percent from the $2.04 billion in the same period last year. Revenue fell 13 percent to $8 billion.

Shares of AMD closed up 19 cents at $21.65 on the New York Stock Exchange but lost $1.26 in extended-session trading after its results were announced. Intel shares lost $1.39, or 7.5 percent, to close at $17.10 in Thursday trading on the Nasdaq Stock Market.