Intel Struggles With Erosion Issues

Intel (INTC Quote) will tell analysts later today that it has regained footing in the netbook avalanche, but first-quarter numbers show the chip shop was still digging out from under its inventory mountain.

A sales slump in computers combined with the rise of netbooks has the industry awash in chips, mostly of the Intel variety. Intel lost 4.7 percentage points of marketshare to rival AMD (AMD Quote) in the first quarter as overall industry processor shipments fell 10.9% from the December quarter, according to a report from IDC released Tuesday.

The news comes on the same day that Intel hosts its annual analysts' day show, which is expected to include an update on inventories at the No. 1 computer processor maker.

Though it is Intel's show, netbooks will take center stage.

The $300 mini-laptops have become the symbol of the consumer electronics recession. Not only have cheaper devices been a hit with bargain hunters, but they also have bruised the giants of the PC industry like Intel, Microsoft (MSFT Quote), Dell (DELL Quote) and Hewlett-Packard (HPQ Quote).

The big problem for Intel is that the Atom processors it supplies to netbook makers sell for far less than its dual core processors used in larger notebooks and desktops. Intel has to convince analysts that there's more than revenue erosion ahead in an increasingly netbook driven industry.

"I expect they will talk about how they are managing the notebook product lines," says TBR analyst John Spooner. "They'll insist that they aren't risking their profitability by selling lower-end processors."