Intel Sees Flash Price Freefall

SAN FRANCISCO -- Intel (INTC) said prices for NAND flash chips in the current quarter have plunged twice as much as the company expected, denting the company's profitability.

During its annual briefing with analysts Wednesday, Intel said that the average selling price of flash memory chips in the first quarter is down 53% sequentially. Intel's initial expectation was for prices to drop only 27%, CEO Paul Otellini told the audience.

Earlier this week, Intel cut its profit margin forecast for the current quarter, pegging its expected gross margin at 54% plus or minus a point instead of its previous estimate of 56% plus or minus a couple of points. The margin shortfall represented the second quarter in a row that Intel's flash memory business has negatively impacted its financial results, raising speculation that the company might ultimately get out of the business.

However, Intel said it expects its other financial guidance to remain intact.

At Wednesday's meeting, Otellini told analysts he was committed to ensuring that the flash business would not be a drag on Intel.

"We're going to fix it or make sure it's profitable one way or another," Otellini said.

"This is a business we entered on the assumption of profitability and we intend for it not to drag down the company going forward," Otellini said.

Shares of Intel were off 3 cents in recent after-hours to $20.17.

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