Advanced Micro Devices, the world’s second largest maker of x86 microprocessors and a leading developer of graphics chips, said Monday that its revenue for the first quarter of 2007 would be down one third from the fourth quarter of last year. The company said it would decrease capital expenditures by half of a billion dollars this year and would take additional restructuring measures to improve efficiencies.

AMD announced it expects to report revenue of approximately $1.225 billion in the quarter ending March 31, 2007, which is an 8% drop annually and is a 30.8% tumble from the Q4 2006 results. The company said that 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.

Currently it is unclear which of AMD’s core businesses – microprocessor or graphics processor/chipset – faced more significant decline during the quarter. However, it is highly likely that both were down quite substantially. During the quarter ended March 31, 2006, AMD reported revenue of $1.33 billion, whereas ATI Technologies claimed sales of $672 million for the quarter ended on the 28^th of February, 2006.

During the Q1 2007 AMD had to reduce pricing of its microprocessors several times to keep them in high demand and sustain market share of about 25%. In addition, the company failed to release commercially its code-named ATI R600 graphics processor aimed at the high-end market, which might have reduced interest towards the family of the Radeon graphics products on the whole.

AMD said it plans to restructure its business model to “increase operational efficiencies and lower its operating cost structure”. AMD will reduce 2007 capital expenditures by approximately $500 million, which the company believes will not materially impact capacity plans for the year. AMD will also significantly reduce “discretionary expenses” and limit hiring to critical positions. The company will provide more details during its conference call to report first quarter 2007 financial results on April 19.

AMD will report first quarter 2007 financial results after market close on April 19, 2007.