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Chipmaker AMD forecasts revenue below estimates

A new AMD Opteron 6000 series processor is seen on a motherboard during a product launch in Taipei April 14, 2010. REUTERS/Pichi Chuang
A new AMD Opteron 6000 series processor is seen on a motherboard during a product launch in Taipei April 14, 2010. REUTERS/Pichi Chuang

(Reuters) - Chipmaker Advanced Micro Devices Inc forecast a steeper-than-expected fall in current quarter revenue, signaling that sales of gaming consoles were not growing fast enough to offset slowing PC sales.

Shares of the company, whose processors are used in Microsoft Corp's and Sony Corp's latest game consoles, were down about 11 percent after the bell. The stock has risen 15 percent in the past month.

"When you look at the stock action going into earnings, there was some expectation that consoles would drive better growth in the first quarter," Evercore Partners analyst Patrick Wang said.

AMD has long competed against larger rival Intel Corp to supply chips for PCs, but as consumers buy fewer laptops and desktops, the company is looking at gaming consoles to drive revenue growth.

Microsoft sold more than three million Xbox Ones, while Sony said PlayStation 4 sales reached 4.2 million from their launch in November to the end of the year.

AMD on Tuesday said it expects revenue to decrease 16 percent, plus or minus 3 percent, in the first quarter, compared with the fourth quarter ended December 28.

This translates to revenue of about $1.34 billion, plus or minus 3 percent. Analysts on average were expecting revenue of $1.36 billion, according to Thomson Reuters I/B/E/S.

Sales of AMD's chips used in PCs, its core business, fell 13 percent in the fourth quarter. The business accounted for over 45 percent of total revenue in the quarter. Total revenue rose 37 percent to $1.59 billion.

Last week Intel gave a lukewarm forecast for first-quarter revenue that did little to dispel concerns about a slowing PC industry.

AMD's net profit was $89 million, or 12 cents per share, in the quarter, compared with a loss of $473 million, or 63 cents per share a year earlier.

Excluding items, AMD earned 6 cents per share.

Analysts on average were expecting a profit of 5 cents per share on revenue of $1.54 billion.

Shares of the company were trading at $3.77 after the bell. They closed at $4.17.

(Reporting by Neha Alawadhi in Bangalore; Editing by Savio D'Souza)

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