Intel Faces Falling Demand

Intel's stock is down about 22% since the start of the year, with shares trading near their 52-week low levels for several weeks.

The company has been in a fierce competition with AMD, which has been slowly chipping away at Intel's dominant share of the PC microprocessor market.

AMD's current lineup of processors is generally considered to provide superior performance and power efficiency over Intel's products.

In March, Intel pared back its projections for first-quarter financial results and scrapped its 2006 outlook, citing weaker-than-expected demand and a slight market-share loss.

At that time, the chip giant said sales in the first quarter would range between $8.7 billion and $9.1 billion rather than its initial projection of $9.1 billion to $9.7 billion.

Intel said Wednesday that first-quarter sales were $8.9 billion, with net income of $1.3 billion, or 23 cents a share, in line with analysts' expectations.

Excluding the effects of share-based compensation, Intel had EPS of 27 cents, compared with 34 cents in the year-ago period.

First-quarter results were bleak across the board. Intel said total microprocessor unit sales in the first quarter were lower than in the previous quarter, as was the average selling price of its processors.

Unit sales of chipset, motherboard and flash memory chips, as well as application processors for cell phones, were also sequentially lower.

Sales were down sequentially in all geographic regions except Japan.

Inventory Clearance

The company's expectations for the current quarter looked equally lackluster, as Intel expects its customers to clear out excess inventory.

The chipmaker said second-quarter sales would be below normal seasonal patterns, coming in at $8 billion to $8.6 billion. Analysts polled by First Call were looking for $8.85 billion.

In the second quarter, gross margins are slated to fall to 49%.