Chipmaker AMD is getting deeper into the red as its losses loss widened in the first quarter as demand and prices for its microprocessors slumped.

Some of the losses are as a result of its expensive but much needed restructuring and paying off lots of its staff to go away. AMD reported that it lost $416 million in the opening three months of the year. This wasn't as bad as Wall Street projected but shares dropped five per cent on the news anyway.

Sales dropped 21 percent to $1.18 billion, but were still higher than estimates of $978 million. Shareholders apparently hoped that AMD would say that it had seen the light at the end of the tunnel. However it did not seem to want to be that optimistic.

AMD's CEO Dirk Meyer said that the economy is still weak, making it very difficult to forecast end-user demand.  "I've heard some say we've hit bottom. I don't know how someone could say we've hit bottom in the current economic climate." AMD said it sold fewer microprocessors and they commanded lower prices, on average.

While the the number of graphics chips sold were also down, but their prices were up. Sales in AMD's graphics division fell 15 percent to $222 million.

AMD underwent a major transformation in the first quarter, spinning off its manufacturing arm with the help of the Abu Dhabi government, a move designed to save money.