Intel Reports Revenue Shortfall

Intel reported less-than-stellar news ahead of the Intel Developers Conference next Tuesday in San Francisco.

The chip giant issued a warning today that first-quarter revenue will come in
below expectations. It is expected to be between $8.7 billion and $9.1
billion, as compared to its earlier forecast of between $9.1
billion and $9.7 billion.

Intel cited weaker-than-expected demand and a
“slight market segment share loss” for the fall off.

Competitor AMD has been making steady market share gains
particularly in the most profitable area — servers.

Mercury Research said AMD’s share of the personal computer market rose to 21.4 percent in the fourth quarter of 2005, up from 17.7 the previous quarter. The last
time AMD reached 20 percent share was in 2001.

On the server side, AMD’s
dual-core Operton had a solid fourth quarter, helping AMD reach 16.4 percent
of the overall server market, up from 12.7 percent.

In a conference call with financial analysts in January, Intel noted
several of its customers had taken advantage of favorable pricing to build
up inventory.

“That extra inventory was used to build systems in the first
quarter, so that accounts for some of the revenue drop,” Mercury analyst
Dean McCarron told

But McCarron also credited AMD’s steady gains across all the major market
segments — desktop, mobile and servers — for hurting Intel.

“I don’t
forecast share until the data is in, but I would have to say AMD has broad
momentum,” McCarron said.

At IDF Intel is expected to show off new technology and give further
details of its product map.

“I think Intel will use the bad
news to its advantage to show off the architectural advances it’s planning
for the second half of this year.”

Intel took another hit yesterday with the release of a Morgan Stanley’s
analyst report that said Google is moving from Intel to AMD
chips for its new servers.

Google had no comment on the report, which
estimated the search giant owns 200,000 servers.

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