Intel aims to bounce back with new chips

Scott Hillis

SAN FRANCISCO: Intel Corp., struggling with weak sales as it loses market share to rival Advanced Micro Devices Inc., hopes to get back on track this week when it unveils faster, more efficient computer chips.

The world's biggest chipmaker hopes the fanfare around its twice-annual developers' forum in San Francisco, beginning on Tuesday, will eclipse its Friday revelation that first-quarter revenue will be considerably lower than earlier thought.

The event is a chance for Intel to showcase upcoming chips for business computers, laptops and desktops. It needs to prove that it too can make chips with heaps of processing horsepower but which use less power than previous designs.

AMD, once content to mimic Intel's advances, has set the technological pace in recent years with innovations such as putting two processing cores in a single chip -- moves that have helped it gobble market share from its much-larger rival.

"Multicore gives us the ability to get back on traditional performance growth lines," Intel Chief Technology Officer Justin Rattner told reporters on Monday. "We have become fanatical about energy efficiency. We have to continue to make progress in terms of energy efficiency."

Analysts expect Intel to focus chiefly on chips for the server computers that run corporate networks. Highlighting the importance of that segment, the event's main speech will be given by Pat Gelsinger, head of Intel's enterprise business.

"My expectation is that Intel's new products are definitely going to narrow the gap with AMD, and in some cases may even close the gap," said Nathan Brookwood, head of semiconductor consultancy Insight64.

The Santa Clara, California-based company will also try to build more buzz around its line-up of microprocessors for laptop computers that form the hottest-selling slice of the maturing computer industry.

Competitive edge



Of course, AMD isn't standing still, either.

The company plans to unveil a chip with four processing cores next year, and analysts say they expect it to show a high degree of integration of the various components, one of the advantages AMD has had over Intel's multiple core chips.

"We think AMD has a 12-to-18 month lead, and we haven't seen anything to change that view," said JoAnne Feeney, an analyst with New York-based investment bank Punk, Ziegel & Co. who has a "buy" rating on AMD stock.

AMD's edge has translated into more market share in every segment of the computer industry.

The company had 22 percent of the global desktop market at the end of 2005, compared with 19.6 percent a year earlier, according to market research firm Gartner. In laptops, its share rose to 10.5 percent in 2005 from 8.5 percent in 2004.

AMD's gain has been Intel's loss. After disappointing Wall Street last quarter with lower-than-expected revenue, Intel on Friday warned that revenue in its current quarter would also fall short of initial forecasts.

Intel shares have fallen steadily since late last year. On Monday, they edged down 2 cents on Nasdaq to close at $20.30, the lowest since October 2004 and 30 percent below a high of nearly $29 hit in July 2005.

Citigroup analyst Glen Yeung cut his profit forecast for Intel after the revenue warning but upgraded the stock to "buy" from "hold," saying he reckoned the share price already reflected expectations of more near-term bad news.

"We see Intel's prospects improving (in the second half) with respect to competitive position, seasonality, and proximity to Vista," Yeung wrote, referring to Microsoft Corp.'s updated operating system that is expected to boost computer sales when it comes out later this year.