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Intel’s profit drops 38% on decreasing processor sales

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Intel's profit drops 38% on decreasing processor sales

Santa Clara (CA) – UPDATE 6:30 PM EST – Intel Q1 earnings result met the expectations of investor, but lower processor, chipset and flash memory sales brought the first substantial revenue and profit decline in several quarters. Reported revenues were $8.9 billion, 32% below the first quarter of 2005; profit dipped 38% in the same time frame.

Chief executive officer said that Intel was confronted with “moderating PC growth” over the past few quarters. He blamed slower chip-level inventory reductions for Intel’s lower sales. Media and industry sources speculated that Intel may also have lost more market segment shares to AMD in several markets, including the higher-margin server segment. During a conference call, Intel said that the company in fact may have lost more market shares to AMD in Q4 2005 than previously anticipated, but ensured analysts that its market share remained stable during Q1 2006.

Overall, Intel reported lower unit sales for its processors. Average selling prices were also lower as a result of the increased competition with AMD which forced Intel to lower the prices for its chips during the quarter. Additionally, Intel reported lower chipset, motherboard and flash sales as well as a declining amount of application processor shipments.

On a positive note, the transition to a 65 nm process appears to be advancing smoothly, as the company was able to ship millions of 65nm dual-core processors. Intel saw “strong acceptance” of the Centrino Duo mobile platform as well as the Viiv platform, Otellini said. The executive confirmed that the firm’s new Core microarchitecture will be launching in the third quarter of this year.

According to information released earlier this year, Intel will be launching first the Woodcrest server chip (Xeon 5100 series) to compete with AMD’s Opteron. The desktop chip Conroe (Core Duo E4000 and E6000 series) will be following shortly thereafter. The mobile Merom processor (Core Duo T5000 and T7000 series), which represents the foundation of the Core architecture may launch in Q4 of this year.

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Intel aims to regain share from AMD in 2006, off to a rocky start