Intel profit falls steeply

Intel Corp. reported $8.9 billion in revenue for the first quarter of 2006, down 5 percent from the same quarter last year.

Blaming a slump in PC growth rates, Intel reported $US8.9 billion in revenue for the first quarter of 2006, down 5 per cent from the same quarter last year.

Net income for the quarter was $US1.3 billion, down 38 per cent from Intel's profit in the first quarter of 2005.

Because of the drop in PC sales over the past few quarters, Intel customers has been unable to sell their inventories of chips, Intel president and CEO, Paul Otellini, said in a release.

Many market watchers see another reason for the disappointing results. Although Intel enjoys an 86 per cent share of the worldwide semiconductor market, it has recently lost business to its chief rival, AMD.

In fact, AMD posted strong quarterly earnings of $US185 million last week, citing hardy sales of its dual-core Opteron processor for servers and workstations and an increase in average selling price.

Intel had seen this problem coming. The company issued a warning in early March that it would miss its previous profit target, lowering its revenue prediction to $US8.7 billion to $US9.1 billion from the original range of $US9.1 billion to $US9.7 billion.

The disappointing results were driven by more than a slump in PCs alone, according to Intel.

Sales of products throughout the industry were lower, including total microprocessor units, average selling price, chipsets, motherboards, flash memory units and application processor units for mobile phones and PDAs.

This trend held true worldwide, as Intel missed its revenue targets in every geographic sector except Japan. Sales of Intel products in Europe, the Americas and Asia-Pacific were down compared to the first quarter last year.

Intel also predicted this slump would continue. The company forecast revenue prediction for the second quarter of $US8 billion to $US8.6 billion. If it holds, that would come in below analysts' consensus estimate of $US8.85 billion.

But Intel was positioned for better results in the second half of 2006, Otellini said. He pointed to promising shipments of its 65-nanometre dual-core processors, the Centrino Duo mobile platform and the Viiv platform for the digital home.

The company also plans to launch a long-awaited family of processors in 2006 to compete with AMD's Opteron; the Conroe, Woodcrest and Merom chips for desktop, server and mobile segments.

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Ben Ames

IDG News Service
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