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AMD reported its first net loss in two years as its acquisition of ATI added to losses stemming from a crushing price war with Intel.

The results are further confirmation that Intel is reasserting its heft, thanks to the release earlier this year of a bevy of new chips based on a refurbished microarchitecture. AMD's profit was especially bruised by sinking prices for server chips, AMD's strong suit over the past few years.

Not that Intel has been immune from casualties. Last week, it reported a 39 per cent decline in profit as it unloaded old products in a fire sale, reorganized the company and dumped employees.

But things have been looking up for the larger chip maker. Its success was on display earlier this week when Sun Microsystems said it would start selling Xeon-based servers, a blow to the image that only AMD was good enough for the job.

AMD's fourth-quarter net loss was $574m, or $1.08 a share, compared with net income of $96m, or 21 cents a share in the same period last year. This year's figures included costs $550m for its purchase of ATI.

Revenue was $1.77bn, compared to pro forma revenue of $1.84bn last year. That was slightly better than the average Wall Street forecast, made tepid ever since AMD warned two weeks ago that gross margin would be hurt by "significantly lower" average selling prices.

The company - which four years ago shed its image as a perennial underdog with the introduction of the Opteron - forecast revenue for the current quarter that was below analyst expectations.

Shares fell almost five per cent in after-hours trading. ®

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