Jan. 11 (Bloomberg) -- Advanced Micro Devices Inc.'s fourth-quarter profit tumbled because of falling semiconductor prices sparked by Intel Corp.'s push to regain market share.

Operating profit, excluding recently acquired ATI Technologies, fell ``substantially'' from the third quarter, Sunnyvale, California-based Advanced Micro said today in a statement, without elaborating. Sales minus ATI rose about 3 percent from $1.33 billion reported in the previous period.

Advanced Micro, the only remaining competitor to Intel in personal computer processors, is facing renewed pressure from its larger rival, which introduced new products and cut prices to snatch back market share. While Advanced Micro had won orders in servers with its Opteron chip, it won't have an updated version until midyear.

``It's probably an AMD problem more than a market problem,'' said Eric Ross, an analyst at ThinkEquity Partners in New York, who downgraded the shares to ``sell'' on Jan. 3. ``It's going to be tougher and tougher for AMD. They're giving share back to Intel.''

Shares of Advanced Micro fell 44 cents, or 2.2 percent, to $19.74 in extended trading after the announcement. They gained 17 cents to $20.18 at 4 p.m. in New York Stock Exchange composite trading and were little changed in the past year. Intel, based in Santa Clara, California, is the world's largest semiconductor maker.

Plunging Prices

Operating income ``was positive but substantially lower,'' the company said. Profitability was ``impacted by significantly lower microprocessor average selling prices.''

Advanced Micro, which will make a full earnings report on Jan. 23, didn't give further details. Operating income totaled $119 million in the third quarter.

The company was expected to report sales of $1.85 billion, the average of 21 analysts surveyed by Thomson Financial. Advanced Micro will take a one-time charge of $550 million in the fourth quarter for its purchase of graphics-chip maker ATI Technologies in October.

Underlining the impact of lower prices, Advanced Micro said fourth-quarter gross margin, the percentage of sales left after productions costs, will narrow from the previous three month's 51.4 percent. That would be the third straight quarter-on- quarter decline.

For 2007, gross margin, including ATI Technologies, will widen to about 50 percent, Chief Financial Officer Robert Rivet said in a Dec. 14 presentation to analysts. He said ATI contributed sales of $350 million to $400 million in the fourth quarter and would have reported a loss.

To contact the reporter on this story: Ian King in San Francisco at ianking@bloomberg.net.

Last Updated: January 11, 2007 21:42 EST