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Thu, Jul 19, 2007 - Page 10 News List

Yahoo, Intel share prices decline

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Shares of Intel Corp, the world's biggest computer-chip maker, and Yahoo Inc, the most-visited US Web site, declined after the companies said competition is reducing earnings.

Intel shares fell as much as 5.4 percent in extended trading on Tuesday to US$24.90 after the company's second-quarter profit margin fell short of its forecast. Yahoo's stock dropped as much as 4.5 percent to US$26.28. The Internet search company forecast annual sales that trailed what analysts had expected.

Smaller rivals are charging less than Intel and Yahoo to win business. Yahoo's customers are placing ads on other companies' Web sites, aiming to get more value for their advertising dollar. At Intel, discounts by competitor Advanced Micro Devices Inc (AMD) have put pressure on prices, CEO Paul Otellini said on Tuesday. That's eaten into Intel's gross margin.

"People are disappointed with the gross margin coming in below expectations," said Greg Barlage, an analyst at Boston-based Baring Asset Management, which oversees US$35 billion including Intel shares. "It's definitely something to be concerned about."

The Silicon Valley companies kicked off the second-quarter earnings season on Tuesday for the US technology industry. IBM Corp reports yesterday, followed by Motorola Inc, Microsoft Corp and Google Inc today.

Yahoo's net income declined for a sixth straight quarter, falling 2.3 percent to US$164.3 million, or US$0.11 a share. The Sunnyvale, California-based company forecast sales for the year of US$4.89 billion to US$5.19 billion.

Sales of display advertisements, including banner and video ads, increased in the low to mid-teens in the quarter, Yahoo president Susan Decker said in a conference call. That's a slowdown from 38 percent growth in the first quarter of last year and 20 percent in the first three months of this year, Jefferies & Co analyst Youssef Squali said.

"We have not continually driven innovation in the display business," Decker said.

She was promoted to president last month in a management shakeup that brought cofounder Jerry Yang (楊致遠) in as chief executive officer, replacing Terry Semel.

"The June quarter was more Terry than Jerry," said David Garrity, director of research at Dinosaur Securities Inc in New York. "Yang is what shareholders need."

Yang and Decker face stiffening competition from social-networking companies, which charge advertisers less. Facebook Inc, a privately owned company based in Palo Alto, California, and News Corp's MySpace dominate sales of advertising on such sites. The market will more than double to US$900 million this year and reach US$2.5 billion in 2011, according to research firm EMarketer Inc in New York.

Intel, based in Santa Clara, California, said net income increased 44 percent to US$1.28 billion, or US$0.22 a share. Gross margin, or the percentage of sales left after production costs, was 46.9 percent, missing the midpoint of the company's forecast range.

Intel's shares had gained 30 percent this year, a sign investors were confident that the company had beaten back a challenge from Sunnyvale-based AMD. Intel's profit fell 42 percent last year after it cut prices to win back market share from its competitor.

"There was a strong run recently," said Pat Becker, who helps manage US$2.5 billion at Becker Capital Management in Portland, Oregon.

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