Last updated: March 3, 2006 8:30 pm

Intel loses market share to AMD

Intel, the world’s largest chipmaker, on Friday disappointed the market for the second time in six weeks with its sales figures, blaming weaker demand for its processors and market share loss to AMD, its biggest rival.

Intel, which has abandoned its practice of mid-quarter updates, issued a revenue warning, predicting sales of $8.7bn-$9.1bn in the first quarter, down from the $9.1bn-$9.7bn it forecast in January.

The group said then that the mid-point of $9.4bn represented a decline of 8 per cent over the fourth quarter – 3 percentage points more than was seasonally normal.

Intel said the revised forecast was “primarily due to weaker than expected demand and a slight market segment share loss”.

Its shares were down 1.8 per cent at $20.12 at noon in New York and have fallen about 20 per cent this year, after fourth-quarter earnings fell short of expectations. Intel, which is seen as a bellwether stock, led the US market slightly lower on Friday, with the Dow Jones Industrial Average off 0.06 per cent.

“It’s a surprise, they are obviously in trouble with [market] share and are seeing weakening PC demand, which is worrying for the rest of the market,” said Apjit Walia, analyst at RBC Capital Markets.

However, Intel’s problems were not mirrored in the fourth-quarter results of other semiconductor companies. In particular, AMD reported a 35 per cent increase in sales over the previous quarter, with its share of the “x86” processor market rising from 11.9 per cent to 15.3 per cent. Intel has all but about 1 per cent of the rest of that market.

Andy Bryant, chief financial officer, had reported a tough December and this appears to have continued into January. Intel, whose customers have been suffering from a shortage of the chipsets that accompany its processors, has been forced to turn to third-party suppliers to meet demand.

Mr Walia said he expected aggressive pricing from Intel in the next two quarters as it tried to reclaim market share from AMD.

This would hit margins and Intel said on Friday that it expected first-quarter gross margin percentage to be “adversely impacted” by the change in revenues. It was already expected to fall 2 percentage points from the fourth quarter to 59 per cent.

More clues to the health of the chip industry will be supplied in Texas Instruments’ mid-quarter update on Monday.

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