Chip price war hits Intel where it hurts

Intel’s profits dropped almost 40% in its last quarter as the effect of the chip manufacturer’s price war with rival AMD continued to take its toll.

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By  Published  January 18, 2007

Intel posted net income of US$1.5 billion for its 2006 fiscal fourth quarter compared to US$2.45 billion for the same period in 2005, the company said this week.

Andy Bryant, chief financial officer at Intel, put the fall in profits down to competition with AMD and the cost of moving to 45nm processing.

Despite the fall in net income, Intel beat analysts' conservative revenue predictions with sales of US$9.69 billion for FYQ4. Revenue improved 11% on Q3, but was still down 5% year-on-year.

For Q4, Intel's gross profit margin dropped to 49.6% compared to 61.8% a year ago, with the firm also expecting a gross profit margin of 49% in Q1 next year.

The results round off a disappointing year for the world's largest manufacturer of microprocessors, which has now seen its profits slump dramatically in four successive quarters.

"2006 was a challenging year," Paul Otellini, CEO, said this week during a conference call with analysts.

"In 2007, we will continue to drive technology, including quad-core and 45nm, while further increasing our operational efficiencies across the company," Otellini added.

Intel is also this week facing formal charges from the European Commission over anti-competition practices, according to media reports.

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