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Intel gives revenue warning

Intel gives revenue warning

Facing increased competition throughout its line of processors, chip giant Intel warned last week that its first-quarter revenue would be lower than expected.

Intel, based in Sunnyvale, California, predicted its first-quarter revenue would be $US8.7 billion to $9.1 billion. That compares to the previous expectation, issued in January when it reported fourth-quarter 2005 results, of $9.1 billion to $9.7 billion.

In a statement, the company said the shortfall was "primarily due to weaker than expected demand and a slight market segment share loss."

Indeed, Intel's warning on softer earnings was in line with a general semiconductor market downgrade issued last week by Citigroup.

But analysts say the problem may be closer to home.

"The momentum right now is favouring AMD. That seems to have been the case for six months in terms of people being aware of it, but more like 18 months in terms of AMD having an impact on the market," says Roger Kay, an analyst with Endpoint Technology Research Associates.

A number of investment analysts are starting to urge caution on Intel. Last week for example, investment firm ThinkEquity Partners lowered its Intel rating to "sell" from "accumulate." ThinkEquity says Intel will have to cut prices as it faces increasing competition, especially in servers, where Advanced Micro Devices has made inroads with dual-core chips.

"It sounds like a cliché to say they're [AMD] firing on all cylinders, but with Opteron they have price, performance and thermals all working in their favour. That was a technical achievement. Intel bet on simpler technologies that were easier to implement, and it turned out not to pay off so well," Kay says.

In the past, AMD has been especially vulnerable to Intel's Centrino processor for applications in low-power notebooks. But today, Kay says, AMD enjoys a technology lead throughout its product line, from Opteron to Athlon and — most recently — Turion, aimed at low-end machines.

Last week, Lenovo Group dealt a blow to Intel when it offered its customers a choice between AMD and Intel chips in its new 3000 series desktop machines.

"AMD has a good story; same performance, better price. With Opteron, they can say 'better performance, better price, and oh, by the way, better thermals.' And now it looks like Turion is doing well in retail sales," Kay says.


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