Price War Pounds Intel

Updated from 7:08 a.m. EST

Intel's(INTC Quote) profit plunged 39% in the fourth quarter, as the company signaled that its bottom line would continue to be pressured by a price war with rival Advanced Micro Devices(AMD Quote).

That concern offset any upside from the chipmaker beating Wall Street's lackluster fourth-quarter expectations. Shares of Intel fell $1.03, or 4.6%, to $21.27 in early trading Wednesday.

On a post-earnings conference call, CEO Paul Otellini said "2006 was a challenging year and our response was to drive for product and technology leadership aligned with the fast growing segments of the marketplace."

Otellini said Intel's next generation of microprocessors featuring 45-nanometer transistors will keep Intel at the technology forefront. And he said he was optimistic that Microsoft's(MSFT Quote) forthcoming Vista operating system would have a positive impact on sales of consumer notebook PCs.

But Intel's management refused to provide specific details on 2007 pricing for its processors -- a metric that industry watchers believe will be key to the company's fortunes.

"We do believe it's going to be a competitive business environment and we're going to have to fight to win orders," said CFO Andy Bryant.

And while Intel said its priority was on retaking share it recently lost to AMD, management declined to estimate what the company's market share was at the end of the year, preferring to wait for published numbers from industry research firms.

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