Intel 2Q07 earnings release

Chipmaker Intel reported second-quarter sales that beat expectations, but the company failed to meet its crucial profit-margin forecast on lower-than-expected chip-selling prices.

Intel reported per-share profit of 22 cents, which it said included tax items that added 3 cents a share to the bottom line. Analysts polled by Thomson Financial had forecast 19 cents a share.

The company said sales rose 8% to $8.68 billion, its first year-over-year sales increase since fourth-quarter 2005. Analysts had expected revenue of $8.54 billion.

In April, Intel had said it expected gross profit margin of 48%. It reported a margin of 46.9%, down from 50.1% the previous quarter and 49.6% in fourth-quarter 2006. In an interview, Intel Chief Financial Officer Andy Bryant attributed the lower margin to two factors.

For one, he said chip prices fell as the industry cleared out the last of a lingering chip glut. He also said Intel had slower-than-expected sales of its Nor-flash memory chips.

"Revenue was at the higher end of the range," Bryant said. "Gross margin, at 47%, was one point below the outlook. With higher revenue, you would expect to see it (the profit margin) be up."