Intel profit rises, revenue falls

NEW YORK (CNNMoney.com) -- Intel Corp. reported Tuesday that net profit rose in the first quarter but sales fell, as it remains locked in a price war with archrival Advanced Micro Devices.

Intel (Charts) said net income rose 19 percent to $1.6 billion from a year earlier. But earnings per share excluding a tax benefit came in at 22 cents a share, matching forecasts on Wall Street, according to a survey by Thomson First Call.

Santa Clara, Calif.-based Intel said revenue fell to $8.85 billion from $8.94 billion a year earlier. Wall Street had been looking for revenue of about $8.99 billion.

Intel sees revenue weakening further in the second-quarter, to a range of $8.2 billion to $8.5 billion.

Despite the sluggish results and outlook, Intel stock edged higher after-hours after rising 1.4 percent during the regular session on Nasdaq.

Intel said gross margin, a key measure of profitability, improved to 50.1 percent in the quarter from 49.6 percent in the previous quarter, helped by lower costs. It also said it expects gross margin to weaken to about 48 percent in the second quarter but then to come in at about 51 percent for the full year.

John Pau of Jefferies & Co. said investors were looking at the 2007 gross margin outlook.

"Even with a weaker second-quarter they saw fit to raise the (gross margin) guidance," said Pau. "There is something that's giving them greater confidence."

The company, which competes with AMD (down $0.05 to $13.47, Charts), also announced it completed planned layoffs ahead of schedule.

The chipmaker sees weakness in the second quarter arising from a variety of causes: ongoing startup costs associated with the new line of 45-nanometer technology chips as well as seasonal weakness.

Chief Financial Officer Andy Bryant, in a conference call Tuesday, cited "excess inventory floating around the world" that could push down Intel's second quarter results, too.

Expectations of restructuring charges haven't gone away either.

"We expect to continue to incur charges as we restructure company to improve financial performance," said Bryant.

But the company said it expects to hold firm against AMD even while transitioning its pipeline to a new class of chips.

The company announced a new generation of chips in March that will achieve a 15 - 45 percent performance without consuming more power.

CEO Paul S. Otellini, in the same earnings call, said, "We're pretty well convinced that when the data rolls in within a week or so we'll be pleased with the answers on market share."