Beset by sinking prices for microprocessors and the cost of acquiring graphics chip company ATI, AMD has reported a fourth-quarter loss of $574m, down from a profit of $96m for the same quarter last year.

AMD blamed most of that loss on $550m it paid in acquisition charges to buy ATI.

The loss came despite rising revenue and an increasing slice of market share compared to rival Intel. Excluding the charges of acquiring ATI and paying stock-based compensation, AMD posted $63m in profit compared with $272m last year. AMD's revenue rose from $1.35bn for the quarter last year to $1.37bn, excluding ATI revenue. Including ATI, revenue was $1.77bn.

AMD chief executive Hector Ruiz said that faced with tougher pricing competition than originally expected, AMD will compete in 2007 by growing its share of the worldwide chip market, pursuing its long-running antitrust lawsuit against Intel, and continuing its transition from a 90-nanometer to a 65-nm chip manufacturing process.

The company will also accelerate its transition to the next step, building chips with 45-nm features, in order to close the gap with Intel, Ruiz said. AMD began its first revenue shipments of 65-nm chips in December, whereas Intel had already reported in September that it was shipping more 65-nm than 90-nm chips.

AMD also lags in the production of quad-core chips, which Intel started shipping under its Xeon brand in the fourth quarter. AMD expects a jump in revenue in the middle of 2007 because certain customers may be waiting to buy new chips until the company releases its 'Barcelona' quad-core Opteron server chip, Ruiz said.

Despite that manufacturing disadvantage, AMD relied on strong processing efficiency to increase chip sales based on its ‘power per watt’ marketing mantra.

"We are not satisfied with our performance, and we know we need to take steps to improve in the future, but we are proud that we grew processor unit shipments over the last quarter," said Dirk Meyer, AMD's president and chief operating officer.

AMD did not report specific numbers but said its fourth-quarter chip shipments grew 26 percent over the same quarter last year.

Most of that growth was driven by a 76 percent jump in sales of AMD's mobile chips, such as the Turion processor for notebook PCs. AMD also saw strong sales of its dual-core Athlon 64 X2 chip for desktop PCs.