Intel admitted on Wednesday it was unlikely to make its revenue forecasts for this year after the world’s largest semiconductor maker saw sales fall 13 per cent in its second quarter.

The Silicon Valley company struggled with sliding demand and falling prices for its microprocessors to beat its lowest expectations of second-quarter sales of $8bn by just $9m, down from $9.2bn a year ago.

Andy Bryant, chief financial officer, said 2006 revenues were now likely to be lower than forecast in April. He predicted sales of $8.3bn to $8.9bn in the third quarter and perhaps a 10 per cent increase in the fourth quarter.

This suggests sales of $35bn for the year, 7 per cent less than the $37.6bn previously expected and nearly 10 per cent lower than in 2005.

Intel has been suffering from soft demand for personal computers and loss of market share to its rival Advanced Micro Devices.

“But I do think [this quarter] is as bad as it gets, business trends are showing improvement,” said Apjit Walia, semiconductor analyst at RBC Capital Markets.

Intel is introducing a new generation of processors for servers, the desktop and notebook PCs over the summer that should lift average selling prices and boost sales.

“In 2006, we are delivering the strongest line-up in the industry, with many of these new products shipping ahead of schedule,” said Paul Otellini, chief executive.

He told an analyst conference call that Intel was well positioned for the second half, although pricing had become more competitive.

Intel hopes to win back market share from AMD with the new chips.

It can make major cost savings as the latest chips are made with smaller 65nm circuitry, but AMD and Intel are locked in a price war that is damaging both.

Second-quarter profits of $855m, or 15 cents a share, beat analyst expectations of 13 cents but were down 57 per cent on the $2bn recorded a year earlier.

Intel has begun a restructuring programme to improve profitability, selling off its mobile phone chip business and announcing redundancies for 1,000 managers.

Mr Bryant said more decisions would be taken over the next two months to take down spending and the headcount of its 100,000-strong workforce.

Qualcomm, whose business is focused on making cell phone chips and licensing its technology, reported a 15 per cent jump in profits to $643m on Wednesday and a 44 per cent increase in revenues to $1.95bn in its third quarter.

But its shares fell 5 per cent in after-hours trading to $34.75 as it predicted a weaker fourth quarter than Wall Street expected.

Intel shares were flat at $18.47.

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