Intel Q2 net falls 57% to $885 mn

San Francisco: INTEL’s second-quarter profit plunged 57% as the world’s largest chip maker struggled with stiff competition and a shift in demand toward less expensive products. The company also posted a disappointing revenue forecast of $8.3bn (e6.7bn) to $8.9bn (e7.13bn) for the current quarter — less than the $9bn (e7.2bn) expected by Wall Street analysts.

Net income for the three months ended July 1 was $885m (e709m), compared with $2bn, in the same period last year. Revenue fell 13.2% to $8bn, at the low end of a forecast Intel delivered in April. The Santa Clara-based company reported sales of $9.2bn in the second quarter of ’05.

Intel’s sales decline was spread across most its geographic regions and came as computer makers reduced their inventory to make way for new Intel products. Shipments declined for most of Intel’s products, including microprocessors, which act as the ‘brains’ in computers, chipsets, which connect a processor to other core components of a PC, and motherboards, the main circuit board. Its flash memory chips, used in cell phones and other handhelds, saw growth.

Stiff competition and a greater percentage of lower-end PCs being sold helped drive down average selling prices of microprocessors, Intel said. Over the past year, a fleet of products from AMD, Intel’s biggest competitor in the market for computer microprocessors, have taken their toll. From the end of ’04 to the end of ’05, Intel lost 5.3 percentage points of market share to AMD, according to Mercury Research.

Intel is introducing a trio of processors that analysts say will help it regain the performance lead over AMD. Part of the sales decline in the second quarter came as Intel shipped fewer processors so its customers could work through excess inventories of older products, Bryant said.

Gross margin, or the percentage of sales left after manufacturing costs, was 52.1 percent, higher than the 47 percent to 51 percent range the company forecast in April. Bryant attributed the better performance to new, more profitable products that began shipping earlier than scheduled.

Intel also had lower inventory write-offs than it had expected, which helped gross margin, Bryant said. The results were released after financial markets ended regular trading. Earlier, shares closed at $18.49, up 28 cents, on the Nasdaq Stock Market. Afterward, shares fell 11 cents in extended-session trading. For the first six months of the year, Intel’s net income fell 46.8 percent, to $2.24 billion (euro1.79 billion), from $4.22 billion. Revenue declined 9.2 percent to $16.95 billion (euro13.58 billion), from $18.67 billion.