The microprocessor maker, the world’s second largest, said its bottom line was also bruised by costs related to its $5.4bn acquisition last year of graphics chipmaker ATI.

AMD forecast continued pricing pain for at least the first half of the year and its earnings guidance for the current quarter disappointed Wall Street. Shares in the company fell in more than 4% to $16.78 in after-hours trading on the New York Stock Exchange yesterday.

Demand for AMD products is greater than its market share, which has been largely limited by the monopoly behavior that has been abusive by our competitor, said chief executive Hector Ruiz, who spoke from the gut on yesterday’s conference call rather than read from a customary script.

He was, of course, referring to Intel, which AMD is suing for alleged anti-competitive behavior in the US and elsewhere. Intel has denied any wrongdoing.

Out of court, the pair battled it out over prices for server microprocessors. Average selling prices for AMD server chips declined significantly during the fourth quarter, while shipments were flat sequentially, said AMD CFO Rob Rivet, on the call.

On the whole, 2006 was a great year for AMD’s server shipments, which grew 135%. But in the final few months, pricing competition has been tougher than expected, Ruiz said.

The company lost $574m, or $1.08 cents a share, during the quarter ended December 31, compared to a $96m profit, or 21 cents, a year ago. Excluding items, such as $550m charge related to its ATI acquisition, the company lost 4 cents a share, or half of the 8 cents analysts had, on average, hoped for.

Revenue fell to $1.77bn from $1.84bn last year.

Looking ahead, AMD forecast revenue for the current quarter, which is seasonally weak, of between $1.6bn and $1.7bn. Analysts were hoping for $1.8bn.

When asked by an analyst whether AMD would consider readjusting its pricing to help boost revenue, Ruiz said, There is no backing away from anything … we’ll fight hard to continue to provide new opportunities to enjoy AMD technology.

That entails facing a rough first half of 2007, in the run up to AMD’s forthcoming new microprocessor architecture, which will first appear during the summer.

We will introduce a new architecture this year … and some customers are waiting to see what performance improvements will come with this introduction, said AMD chief sales marketing officer Henri Richard, on the call.

Ruiz stressed that all of AMD’s pricing issues were related to its server segment. It is a very competitive scenario and we expect it to continue to be, Ruiz said. We are making plans to adjust to that for at least the first two quarters of the year.

AMD will chase higher server ASPs with its forthcoming quad-core server microprocessors, which Richard confirmed are slated to launch ahead of quad-core desktop products.

Ruiz said the server market would continue to be driven in the traditional fashion, where customers will pay more for new features.

However, this won’t be the case in the client space, mostly because the launch of Microsoft Corp’s new Windows Vista operating system at the end of the month will see greater platform demand, rather than just demand for the best processor, he said.

We have some opportunity to grow but we expect the environment to be extremely competitive, Ruiz said. This doesn’t mean AMD expects to do any bundling of its products, unlike Intel’s strategy.

Rather, AMD expects and as we have experienced ourselves that Vista will provide the impetus for unit demand in 2007 and beyond, Ruiz said. However, he also said there was still some uncertainty surrounding Vista, even though AMD was very bullish.

AMD’s mobile business grew 78% last year. And during the fourth quarter, mobile ASPs were slightly up, while desktop ASPS were down marginally. We did not see a major shift in desktop client pricing; we saw modest improvement in the mobile space, Ruiz said, without providing detail.

The company also doesn’t break out product revenue, but Rivet said AMD gained unit share in the mobile and desktop markets during the fourth quarter. Unit shipments and revenue for mobile products grew 41% sequentially, while desktop chip shipments rose 14% and revenue grew 8%, he said.