Intel posted a sharply lower second quarter profit today and issued a disappointing sales forecast as it cut prices to compete with Advanced Micro Devices.
Net profit for the second quarter was $885 million down nearly 56 per cent from a year earlier.
Eric Ross, analyst at ThinkEquity Partners
The technology heavyweight said it expected sales for the third quarter to be between $8.3 billion and $8.9 billion, lower than Wall Street's average forecast of $9.03 billion.
"The revenue number is definitely a worry," said Eric Ross, an analyst at ThinkEquity Partners. "I think they are going to do worse than this. There is a pricing dynamic in the industry. AMD and Intel are in a price war. Intel is probably going to underperform these numbers."
Intel shares fell 1.4 per cent to $18.23 in extended trading on the Inet electronic brokerage. The stock has fallen about a third over the past year as Intel has struggled to stem AMD's market gains.
Intel chief financial officer Andy Bryant said pricing would remain an issue throughout the year but that he expected Intel would regain some share from AMD. "We continue to see a competitive price environment," Mr Bryant said.
"I believe we'll gain market segment share in the back-half of the year. It's a competitive environment, so it's not an instantaneous overnight switch."
On a conference call later, Mr Bryant defended himself against a barrage of questions from analysts who voiced concern that Intel was building dangerous levels of inventory. "I don't think history shows I'm in a danger zone on inventory," Mr Bryant said. "Would I like it to be less? Of course, but it doesn't lead to big write-offs."
Despite its recent woes, some analysts have said Intel may be poised for a comeback as it rolls out new chips that make it more competitive against AMD.
It unveiled a new chip for server computers that run business networks last month, and next week debuts a new desktop chip.
Intel is seeking ways to shave $1 billion in costs, leading to speculation that it may lay off thousands of workers and dump lackluster products.
The review, which ends later this month, has already led to the sale of Intel's unprofitable communications chips business and the firing of 1,000 managers.