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Intel profit falls 35 percent

AMD's onslaught blamed for dip in revenue

Following layoffs and executive shuffles, Intel has reported a third quarter profit of $1.3bn, beating analysts' estimates, but still falling far short of its results last year.

The company reported revenue of $8.7bn, thanks in large part to the sale of six million of its new Core Microarchitecture chips for notebook PCs and servers. That generated earnings of $0.22 per share, stronger than the prediction of $0.18 per share earnings on revenue of $8.62bn, according to analysts polled by Thomson Financial.

The numbers were down 35 percent compared to Intel's profit in the third quarter of 2005, and down 12 percent compared to past revenue. In the same quarter last year, Intel earned $0.32 per share on revenue of $9.96bn.

Intel chief executive Paul Otellini admitted in April that the company would miss its annual earnings target as it lost market share to rival AMD, while worldwide PC growth slowed

Since then, he laid off 10,500 people in September, shrinking the company by 10 percent in the culmination of a six-month reorganisation that included an executive shuffle, the dismissal of 1,000 middle managers, and the sale of two business units.

He also accelerated the launch of the Core 2 Duo family of chips, as well as the "Tulsa" and "Montecito" Itanium server chips. He also pulled the launch date for the earliest quad-core chips into November instead of the first quarter of 2007.

Core 2 Duo and quad-core will help drive better results next quarter, Otellini said during a conference call with investors. Intel has now begun shipping the quad-core version of its Core Microarchitecture chips and expects growing revenue from its vPro technology bundle for business desktops, he said.

However, Intel was also hurt by a slump in chip prices as it struggled to clear older processors, including the Pentium brand, from store shelves and to compete with strong offerings from AMD. Its sales of flash memory units also fell.

Intel took refuge from those disappointments in strong sales in the server market, where its "Woodcrest" Xeon 5100 chip has risen to a 40 percent market share since launching in June, and its Itanium 2 chips have gained market share from Sun Microsystems's Sparc and IBM's Power chips, Otellini said.



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