Intel hits wall with massive revenue and earnings drops

Stan Beer
Thursday, 20 July 2006 11:19

IT Industry - Strategy

Giant chip maker Intel Corp has had its worst quarter since the dot com bust, announcing huge declines in revenues and earnings amid stiff competition from rival AMD.

A 13% drop in revenue to US$8.01 billion, US$1.22 billion below the previous corresponding quarter, plus a 57% earnings plunge of US$1.19 billion to just US$885 million for the quarter, has sent the company's share price south.

Analysts blamed Intel's poorest performance in five years to customers waiting for Intel to cut prices on existing products in the wake of new generation products being brought to market.

Intel has rushed out a range of dual-core processors for different hardware platforms servers, desktops and high performance computers over the past two months. The hasty releases were in response to smaller rival eating into Intel's market share and passing the 20% threshold.

In order to get Intel back on track, the company's CEO Paul Otellini has pledged to cut US$1 billion in costs this year. Most of that is expected to come from staff reductions of up to 15%. One thousand Intel managers are to be axed, with analysts tipping that as many as 15,000 jobs to be slashed in total.

On the bright side for Intel, its new range of dual-core processors are getting very positive reviews and are said to have superior performance to AMD's current range. This in turn will probably lead to price cuts by AMD. Intel also believes it will beat AMD to market with its quad-core range of processors next year.