Intel Profit Drop Isn't Firing Offense, Barrett Says (Update5)
2006-05-17 18:00 (New York)

     (Adds more comments from Otellini in eighth paragraph.)

By Ian King
     May 17 (Bloomberg) -- Intel Corp.'s falling profit, loss of
market share and slumping share price don't amount to a ``firing
offense'' Chairman Craig Barrett told shareholders.
     The decline in the value of Intel shares and performance-
related pay was ``punishment'' for executives, Barrett, 66, said
today in response to questions at the company's annual
shareholders' meeting.
     ``It's not clear to me that a firing offense has been
committed,'' Barrett said. ``It is clear to me that the financial
and stock performance of the company is unsatisfactory.''
     Chief Executive Officer Paul Otellini made a presentation to
investors -- a year after taking over the top job from Barrett --
to explain how Intel plans to regain market share and turn around
sales that he forecasts will decline in 2006 for the first year
in five. He told investors who complained about a slumping share
price that change won't come soon.
     The financial community's attitude toward Santa Clara,
California-based Intel's share price won't change until it
regains market share lost to rival Advanced Micro Devices Inc.,
said Otellini, 55, who promised to make that happen this year.

                          `Talk is Cheap'

     ``The analyst community was mixed in its reports. They all
said 'show me','' said Otellini who is introducing new products
in the third quarter and plans to cut $1 billion off expenses
this year. ``Sentiment from that community and investor sentiment
will not shift until you do something. Talk is cheap here.''
     Intel is replacing its flagship Pentium 4 chip with a new
design for server, laptop and desktop computers called Core in
the third quarter. Otellini said that will give his products the
biggest bump in performance that they have had since the
introduction of the original Pentium in 1993.
     Otellini said he had probably hired too many people last
year when Intel added 15,000 workers. The company has had a
hiring freeze since January and will be ``re-sized'' to fit its
revised view of demand, he said.
     Shares of Intel, the worst performer on the Dow Jones
Industrial Average this year, fell 40 cents to $18.66 at 4:30
p.m. New York time in Nasdaq Stock Market composite trading. They
have declined 25 percent this year .
     ``The stock is probably going to bottom out in the $16 to
$18 range,'' said Gus Richard, an analyst at First Albany Capital
in San Francisco. He has a ``neutral'' rating on the shares and
doesn't own any. ``AMD has taken market share and technology
leadership away from Intel. That reverses itself in the second
half of the year.''
     Profit in the quarter ended April 1 sank 38 percent to $1.35
billion, the biggest decline in more than four years, the company
reported last month. In the fourth quarter Intel's share of the
market for personal computer microprocessors fell below 80
percent for the first time in four years.
     Total revenue from PC chip sales, derived by adding
processor revenue from Intel and Advanced Micro, grew 10.4
percent in the first quarter from a year earlier.

--With reporting by Ellen Braitman in New York. Editor: Wolfson

Story illustration: See {INTC US <Equity> ANR <GO>} for a
chart of analysts' recommendations on the stock. To chart
Intel's earnings against estimates, see
{INTC US <Equity> SURP <GO>}. For Intel's gross margin history
and other financial ratios, see {INTC US <Equity> FA <GO>}.

To contact the reporters on this story:
Ian King in San Francisco at (1) (415) 743-3548 or
ianking@bloomberg.net.

To contact the editor responsible for this story:
Emma Moody at (1) (212) 617-3504 or emoody@bloomberg.net.

[TAGINFO]
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-0- May/17/2006 22:00 GMT