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Chipping away at profits

Amy Scott Jan 23, 2007


MARK AUSTIN THOMAS: The battle between the big chipmakers just keeps heating up, and no I don’t mean between Lay’s and Pringles. Marketplace’s Amy Scott says Advanced Micro Devices is feeling the heat from its archrival Intel.

AMY SCOTT: AMD reports its fourth quarter earnings today and analysts expect disappointing news.

The company has warned that falling chip prices are cutting into its profits.

And yesterday, the firm took another hit. Loyal AMD client, Sun Microsystems, announced a new deal to buy chips made by Intel.

Dean McCarron is an analyst with Mercury Research. He says competition from the much smaller AMD has forced Intel to cut costs and improve its products. And it’s paying off.

DEAN MCCARRON: So AMD is facing a stronger competitor now than they were facing a year ago.

But Intel isn’t off the hook.

McCarron estimates the company lost more than 5 percent of the overall chip market to AMD last year. Last week, Intel said its fourth quarter profits shrank by 39 percent.

In New York, I’m Amy Scott for Marketplace.

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