Sunnyvale (CA) - Declining microprocessor sales as well as dropping average selling prices for its microprocessors have pushed AMD deeper into the red. The company reported a net loss of $611 million on revenues of $1.233 billion, which is more than 20% below the guidance the company expected at the end of Q4 2006.

The loss includes charges related to the ATI acquisition in the amount of $113 million, but is mainly a result of the increasing competition with Intel in the microprocessor market. The company said that its Q1 margins were 31%, down from 40% in Q4 2006 and down from 59% in Q1 2006. "The decrease from the prior quarter was largely due to significantly lower microprocessor unit shipments, lower microprocessor average selling prices (ASPs), and the inclusion of the former ATI operations, which generally have lower-margin products, for the entire quarter, AMD said.

AMD had revenues of $1.332 billion and a profit of $259 million in Q1 of 2006; in Q4 2006, the company reported revenues of $1.773 billion and an operating loss of $529 million.

"After more than three years of successfully executing our customer expansion strategy and significantly growing our unit and revenue base, our first quarter performance is disappointing and unacceptable," said Robert J. Rivet, AMD's chief financial officer, in a prepared statement. "We are aggressively addressing the issues that led to our significant revenue decline. We are aligning our business model, capital expenditures and cost structure with the goal of accelerating our return to profitability."

In a press release, AMD said that computing solutions group sales were $918 million, down 38% sequentially. "Year-over-year server and desktop processor unit shipments and revenues declined significantly, while mobile processor unit shipments and revenue increased significantly," the firm said.

Last week, AMD warned the financial community that the company would report significantly lower revenues. The company also announced that it plans to restructure its business model to increase operational efficiencies and lower its operating cost structure.

AMD's stock dropped about 2% in after hour trading late Thursday.