Intel Shares Fall

Posted 17 January 2007 @ 06:21 pm EET     Print     Reprint     E-Mail     Comments

BOSTON (Reuters) - Intel Corp. shares fell more than 5 percent on Wednesday after the microchip giant reported a drop in earnings and said this year's gross margins would not improve.

The world's No. 1 chipmaker said late on Tuesday that its gross margin would be about 49 percent in the first quarter and 50 percent for 2007. Fourth-quarter gross margin was 49.6 percent, which was down from 61.8 percent a year earlier.

Analysts said that the forecast for 2007 was disappointing and a sign that a price war with Advanced Micro Devices Inc. will continue to eat into Intel's bottom line over the coming year, as it did in the fourth quarter.

"Given our view that price competition between Intel and AMD could continue for some time, there is not likely to be upside to this (gross margin) number," ThinkEquity analyst Eric Ross said in a note to clients. "And the possibility of downside exists."

Intel, which supplies microprocessors for about three-quarters of the world's personal computers, said fourth-quarter net profit fell 40 percent to $1.5 billion, while revenue slipped 5 percent to $9.7 billion. Microprocessors are chips that serve as the brain of personal computers.