Intel fails to halt profits dip as rival AMD leaps forward

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By  Published  October 27, 2006

Intel’s profits slide continued unabated in its third fiscal quarter despite a raft of new products and cost-cutting measures introduced since April.

Rubbing salt into the chip giant’s wounds, bitter rival AMD saw another huge rise in its profits from a year ago, but both vendors have been feeling the effects of the brutal chip price war the pair have been engaged in.

Intel’s net income slumped by over a third to US$1.3 billion, making it the third quarter in a row profits have dropped dramatically. Its revenue also went down 12% to US$8.7 billion.

Sales were higher than expected and the results overall were nowhere near as bad as the previous quarter — which saw a record 56% drop in profits — but Intel still has a long way to go if the vendor is to return its growth to anything like that seen during 2005.

AMD continued to impress with an increase in profits of 77% to US$134.5million, but the firm’s revenue was down 12.5% from US$1.52 billion a year ago due, in part, to cuts in the price of its processors.

The price war impacted on Intel’s bottom line as well as it has tried to get prevent AMD from gaining any more market share and also clear out its old processors to make way for ones based on its new core microarchitecture chip design.

Microprocessor revenue from its Digital Enterprise and Mobility Groups was down US$1.5 billion in Q3 compared to the same time last year.

Paul Otellini, CEO at Intel, described the price cuts in a conference call with analysts as “perhaps the largest we’ve ever made,” but Andy Bryant, CFO Intel, suggested pricing pressure should ease in the fourth quarter and into next year.

“We’ll always be in an environment where price is competitive. But Q2 was worse than Q3, which I think will be worse than Q4,” Bryant stated.

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