Intel Q2 profit falls short of forecasts

The world's No. 1 maker of computer chips - Intel Corp

reported lower than expected second quarter earnings hurt by seasonal slowness and price

wars at the low-end of the PC chip market. Intel expected a strong second half of the year

with sales and profit picking up.

Net income increased to $1.75 billion or 51 cents a share,

from $1.2 billion or 33 cents during the same period last year. Its profit was 2 cents per

share less than the average analyst estimate of 53 cents, according to First call Corp

which tracks Wall Street estimates. Sales rose 14 per cent to $6.75 billion from $5.93

billion recorded in last year's second quarter but was down by 5 per cent from the first

quarter of 1999. Its revenue fall included a rare drop in average selling prices, as it

was engaged in a price war with rival Advanced Micro Devices Inc (AMD). The company has

been relentlessly cutting prices of its lower cost Celeron chips in a battle to win market

share from (AMD).

Gross margin or the percentage of sales remaining after

costs of production are deducted is expected to widen from 59 per cent in the second

quarter. Intel is expecting the gross margin for the full year to be 60 per cent, up from

an earlier forecast of 57 per cent.

Intel stock, which slipped 6.25 cents to close at $65.375

in regular Nasdaq trading, initially tumbled in after-hours trading after the earnings

release but later, it bounced back to $65.125.

Intel expects revenue to rise in the third quarter from the

second quarter.