Intel Shares Turn Lower

Intel reported net income of $1.3 billion, or 22 cents a share, vs. $885 million, or 15 cents a share in the year-ago period. Excluding tax items that increased EPS by 3 cents, Intel EPS was in line with the average analyst expectation of 19 cents.

Intel executives said the company benefited from a strong product line-up and improvements in its manufacturing operations.

Servers and notebook PC microprocessors were Intel's strongest businesses during the second quarter.

Shipments of Intel's quad-core Xeon server processor doubled in the quarter, with more than 1 million units shipped since the products release in November. And Intel said its mobile processor revenue surged 22% year-over-year to $2.4 billion.

Intel said higher overall unit shipments of microprocessors were offset by lower average selling prices, and executives acknowledged that prices declined more than they had anticipated.

"While demand for computers was strong, pricing remained competitive, notably in the low end of the PC marketplace," said CEO Paul Otellini. He said the price erosion was affecting not only desktop PC microprocessors, but also the chips destined for low-end consumer laptops.

Intel and rival Advanced Micro Devices(AMD) have aggressively slashed prices over the past year in order to win market share. The price war has taken a toll on gross margins at both companies.