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Intel's first-quarter profit down on slow demand

Intel Corp, the world's largest inchipmaker, reported on Wednesday that first-quarter net profit it fell 38 percent from a year ago to US$1.3 billion on sluggish demand for PC chips.

The results, amounting to US$0.23 a share including stock option expenses, matched Wall Street expectations.

Sales fell five percent to US$8.9 billion, also in line with analyst forecasts.

sales warning

Intel extended its warning about lower revenues, saying it sees a drop of about 3 percent for its full-year sales compared with revenues last year of US$38.8 billion.

Just three months earlier, Intel said it had been expecting a 6 percent to 9 percent increase in sales.

The chip giant has taken its knocks this year, as smaller rival Advanced Micro Devices Inc has grabbed market share.

But the company said that despite the weakness in the key segment of PC chips, it hopes for improvement later this year.

"We believe PC growth rates have moderated over the course of the past few quarters, leading to slower chip-level inventory reductions at our customers and affecting our revenue in the first half of the year," said Intel president and chief executive officer Paul Otellini.

Otellini said Intel plans to launch new processors for servers, desktops and mobile PCs in the third quarter, "giving Intel performance leadership across the server, desktop and mobile segments and setting the stage for a strong second half."

dual processor

Intel is betting on this product overhaul to stave off market share losses to AMD, which beat Intel to market last year with a key technology that puts two processing engines on a single chip. That strategy helped AMD gain a bigger share of the lucrative server market.

Some analysts expect Intel to make deep price cuts to clear out its older inventory ahead of the new product releases.

The price cuts are expected to hurt Intel's gross profit margin through the September quarter.
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