Intel last night posted fourth-quarter profit and revenue below expectations as the top chipmaker suffered from weak demand for processors used in desktop computers.
The news sent Intel shares into a tailspin falling more than 9 per cent in after-hours trading.
Intel, which makes the microprocessors that drive some 90 per cent of the world's personal computers, also forecast first-quarter revenue below Wall Street targets and said it had lost some share to smaller rival AMD.
Intel said net income for the fourth quarter rose to $2.5 billion, or 40 cents per share, from $2.1 billion, or 33 cents per share, a year earlier.
Revenue rose 6 per cent to $10.2 billion from $9.6 billion, below expectations of $10.56 billion.
"They not only missed revenue and guided below consensus, but they are giving us higher expenses, higher tax rates, so the numbers are going to come down," said Cody Acree, an analyst with Stifel Nicolaus.
Shares of the world's largest PC maker Dell fell 3.6 per cent and Apple Computer, which is switching to Intel chips, fell 1.8 per cent.
But analysts have said Intel is positioned for a strong 2006 as it rolls out powerful new chips for laptop computers and throws its marketing muscle behind a program to turn PCs into home entertainment centers.
Intel said gross margin in the fourth quarter was 61.8 per cent, compared with 59.7 per cent for the third quarter and below the company's forecast of 63 per cent.
Capital spending in 2006 would rise 19 per cent, to about $6.9 billion, as Intel retools factories with new manufacturing technology, Intel said.