SAN FRANCISCO — With its sales shriveling even more than analysts feared, Advanced Micro Devices Inc. is imposing a partial hiring freeze and clamping down on other major expenses as the slumping chip maker tries to weather a fierce battle with Intel Corp.

The cost-cutting measures outlined yesterday accompanied a first-quarter warning that signaled the Sunnyvale-based company's recent troubles are worsening.

AMD said its revenue for the three months ending in March totaled $1.23 billion, well below the company's initial estimates of $1.6 billion to $1.7 billion.

Management had previously acknowledged AMD would miss its revenue target, but the magnitude of the shortfall was more severe than Wall Street had expected. Analysts, on average, had projected first-quarter revenue of $1.55 billion, according to Thomson Financial.

The revenue miss "points to an even more dire situation ... than the more bearish forecasts have called for," Banc of America Securities analyst Sumit Dhanda wrote in a note yesterday. Based on the weak first-quarter revenue, Dhanda estimated AMD's chip shipments plunged by 28 percent, pulling the company back to March 2005 levels.

With less money coming into the company, AMD will retrench. As part of the austerity campaign, AMD will fill only "critical" job openings and shave $500 million from this year's capital expenditures budget — a 20 percent reduction.

AMD ended 2006 with 16,500 workers. Management will provide further details about the planned overhaul in its April 19 discussion of the company's first-quarter results.

The company blamed the disappointing results primarily on lower prices for its chips — a byproduct of an intensifying battle with Intel, the world's largest maker of the microprocessors that power personal computers and scores of other high-tech devices.

Although the ruthless competition has been good for consumers and businesses shopping for less-expensive computers, it's hurting the two largest chip makers, American Technology Research analyst Doug Freedman said.

"I keep waiting for one of these companies to cry 'Uncle!' " Freedman said. "Until that happens, it's hard to recommend these stocks."

Investors seemed encouraged by AMD's cost-cutting commitment as AMD shares climbed 49 cents, or 3.8 percent, to close yesterday at $13.35 on the New York Stock Exchange. AMD's stock price has plummeted by about 60 percent during the past year, a $9 billion drop in market value that has underscored concerns about the company's ability to withstand Intel's pricing pressure.