The second-biggest maker of personal-computer processors, Advanced Micro Devices Inc (AMD) has said that it is expecting lower margins in the third quarter.

The company has said that its ross margin wouldbe lower despite an expectation of higher sales during the quarter. The total gross margin, which is the percent of sale remaining after deducting cost of production, is expected to fall per cent from 40 per cent earlier.

The falling margin shows that the company's new chip business is not returning expected returns and a planned expansion is not expected to deliver desired revenues to the chip maker.

Chief Executive Officer Rory Read is aiming to generate about a fifth of the company's revenues from new sources that includes game-console processors for Sony and Microsoft as the company sees a slowdown in the PC market. Company's revenues are expected to rise 22 per cent, plus or minus 3 per cent, from the second quarter, AMD said in a statement.

The shares of the company fell 13 per cent to $4.03 at the close in New York, recording its sharpest fall since Oct. 19. The shares have risen 93 per cent till yesterday this year.