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Intel, the world’s biggest chipmaker, said on Tuesday it had achieved solid results in its first quarter as prices for its processors held up and margins improved above 50 per cent.

Its earnings report contrasted with the three warnings issued by its microprocessor rival Advanced Micro Devices this year. In the latest last week, it said first-quarter sales would be more than 20 per cent less than earlier expected due to lower average selling prices and significantly lower unit sales.

Intel reported first-quarter sales of $8.85bn, below Wall Street forecasts of $8.96bn and figures of $8.94bn recorded a year earlier. Earnings per share of 27 cents were in line with the analyst consensus gathered by Reuters Estimates, taking into account a tax credit of 5 cents per share.

Paul Otellini, chief executive, said its new Core microarchitecture family along with cost-cutting measures were behind the “solid financial results”.

“Our product strength is reflected in the fact that average selling prices for the quarter held up well in a very competitive environment.”

He said there was competitive pricing in the lower-end of the market in particular and there had been a decline in server average selling prices – the area of the market where Intel is trying to regain market share from AMD.

Intel has been engaged in a price war with its rival but has had the advantage of newer products made in more cost-effective advanced processes.

It reported gross margins had climbed back to 50.1 per cent after falling below 50 per cent in the second half of last year. It had earlier forecast first-quarter gross margins of 49 per cent. It raised its 2007 forecast to around 51 per cent, up from 50 per cent.

Intel said lower costs for its microprocessors and good inventory management had more than offset the effects of lower revenues and start-up costs of new production lines.

The Silicon Valley mainstay said its global workforce had been reduced to 92,000, meeting its target one quarter ahead of schedule.

Intel shares were 0.3 per cent higher at $21.05 in after-hours trading in New York.

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