Intel Corp. may still be one of the world"s most profitable companies, but investors have shown little patience with the biggest maker of computer chips as it loses market share. The stock is down more than 20 per cent this year, less than half the analyst community rates Intel worthy of an investment right now, and one analyst describes the $39-billion (U.S.) company as "in survival mode."
Last year proved a banner year for Intel, with sales hitting a record $38.8-billion and profit $8.7-billion. But this year the company is forecasting a 3-per-cent decline in sales. Worse, its juicy gross profit margin is slipping. In the first quarter, the figure decreased to 55.1 per cent from 61.8 per cent in the previous quarter, and Intel management warns of a further decrease through 2006.
Just down the street from the Santa Clara, Calif.-based company, the story at Advanced Micro Devices Inc. is very different. The shares have rocketed more than 125 per cent in the past 12 months, including 10 per cent this year.
The combative AMD has been an irritant to Intel for years. But at one-sixth the size, it has rarely been a threat. That changed in the first quarter, when AMD secured substantial market gains, pushing Intel"s hold down to less than 80 per cent for the first time in years. AMD"s market share for PCs increased to 22.4 per cent in the first quarter, up from 16.4 per cent in the fourth quarter, according to Mercury Research.