SAN FRANCISCO -- Battered by product delays and acquisition costs, beleaguered chip maker Advanced Micro Devices Inc. (AMD: 6.34, +0.11, +1.76%) said Monday that it will jettison 10% of its work force and warned investors that first-quarter sales were lower than expected across all business lines.

The Sunnyvale-based company's job cuts, which amount to 1,600 workers out of roughly 16,000 worldwide, were expected.

But the sales miss surprised Wall Street. Analysts polled by Thomson Financial were expecting AMD to ring up $1.61 billion in sales; the company says sales for the three months ended March 29 were closer to $1.5 billion, a 15% drop from the year-ago period.

AMD shares fell 14 cents, or 2%, to $6.20 in after-hours trading. The stock had risen 11 cents to close at $6.34 before the layoffs and sales warning were released.

AMD has fallen on hard times as it confronts intensifying competition from Intel Corp., the world's largest semiconductor company, and tries to digest the $5.6 billionacquisition of graphics chip maker ATI Technologies Inc., which AMD recently said is worth about 30% less than when it was acquired.

AMD views the acquisition as a key way to attack Intel and incorporate better graphics capabilities into its chips.

Graphics are now a key battleground for chip makers as more and more Internet surfing involves video and as the graphics requirements for computer games are heightened.

Lengthy product delays for its new Opteron server chip, a product critical to the company's financial recovery, also hurt AMD's competitiveness. Technical glitches pushed back the chip's full release for months after the official launch in September.

AMD's losses in 2007 were staggering, capping a brutal two-year stretch in which the company's market value plunged from more than $20 billion to $3.84 billion today.

In 2007, AMD lost $3.38 billion, $2 billion of which were non-cash charges. Revenues were $6 billion.

The stock has fallen from over $40 a share in early 2006.
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