Intel Says Sales to Fall Short

Times Staff Writer

In another sign of Intel Corp.'s eroding market share, the world's largest chip maker warned Friday that it would miss quarterly sales targets as demand slips and archrival Advanced Micro Devices Inc. grabs customers.

It was the latest indication of vulnerability from Intel, which supplies 80% of the microprocessors that run computers. In recent quarters, the Santa Clara, Calif.-based company has grappled with component shortages, canceled products and gains by AMD.

"Intel is far from out of the woods; they may just be getting into them," said Rick Whittington, a chip analyst with Caris & Co. "AMD now has 20% market share, and AMD is producing more chips this quarter from their new [plant] in Germany. So Intel is being pressed, and we'll see more of that."

Since mid-January, when Intel reported fourth-quarter profit and revenue that fell short of projections, the Silicon Valley icon has watched its stock slide 20%. Its shares fell as low as $19.86 on Friday, a 52-week low, then closed at $20.32, down 17 cents.

"The fact that the stock is holding up reasonably well is that there's not really new news now," said James Ragan, an analyst with Crowell, Weedon & Co. in Los Angeles. "This is a continuation of the bad news that we got in January. Everybody knows that AMD did gain market share in the fourth quarter, and it appears it's a continuation, and Intel for the first time is acknowledging that. So they're being more conservative."

Intel said revenue this quarter would be $8.7 billion to $9.1 billion, a lower range than the $9.1 billion to $9.7 billion it forecast in January. Intel executives declined to comment further Friday.

The sales warning underscores the advances that Sunnyvale, Calif.-based AMD has made in recent years in hacking away at Intel's position. Intel still dominates the overall computer processor market, but AMD has been taking market share in processors for PCs and for server computers.

Last quarter, for instance, AMD outsold Intel for the first time in U.S. retail desktop sales.

"We know Intel's a little behind AMD, which is getting a lot of positive ratings on the performance of their chips," said Ragan, who owns Intel shares and rates them a "buy." "There's a lot of different kinds of chips sold now, but AMD has some chips that are offering better performance at a better price, and it's hard to compete with that."

Intel began shipping processors late last year that are built with wires as narrow as 65 nanometers across, the most state-of-the-art process available. A nanometer is a billionth of a meter.

AMD's chips are still made at the 90-nanometer level but provide more performance for the price.

That means "Intel could have a difficult second half," said Whittington, who rates Intel "below average" and AMD "buy."

"AMD has superior performance at lower power, and their cost to manufacture, even though they're behind a generation, is commensurate with Intel," Whittington said. "Hence when AMD catches up in process, they will lengthen their lead."

But AMD has troubles of its own, including slowing PC demand and the continuing refusal of Dell Inc., the world's biggest PC maker, to use AMD processors in its computers.

AMD's shares fell $1.82, or more than 4%, to $39.51 on Friday. They are up 29% this year.

AMD executives declined to comment.

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