Intel’s results mostly met analysts’ expectations, yet the company’s outlook disappointed. Intel said it expects between $8bn and $8.6bn in revenues during the current quarter, below the $8.9bn analysts had hoped for.

The second half of the year would be a time for Intel to reset its business, said chief executive Paul Otellini, on a conference call with analysts.

Intel has a slew of new products built on its new, low-powered chip architecture lined up for release in the second half. Otellini said that it would announce its new dual-core desktop processor, dubbed Conroe, and mobile processor, Merom, during the third quarter.

Intel is expecting some share gain in the second half of the year because of the better produce line up, said Intel CFO Andy Bryant, on the call.

In the meantime, it seems some customers are holding back on major purchases, causing a slowdown in demand for Intel processors.

For the most recent quarter, Santa Clara, California-based Intel posted a profit of $1.35bn, or 23 cents a share, down from $2.18bn, or 35 cents, a year ago. Analysts had hoped for earnings on average of 22 cents.

Revenue during the quarter fell 5% to $8.94bn from $9.43bn a year ago.

For the full year, Intel said overall revenue would be about 3% lower than the $38.8bn it garnered last year. Earlier this year, Intel forecast between 6% to 9% higher sales for 2006 compared to last year.

Still, most analysts expect about $38bn in revenues on average for the full year.

Intel stock rose slightly by more than 1% to $19.77 in after-hours trading on the Nasdaq.

While Intel blamed a slowdown in demand for its results, the chipmaker also acknowledged increased competition from AMD, which recently posted a 70% jump in quarterly profit.

During the past couple of quarters, AMD has chipped away at Intel’s roughly 85% market share.

Intel lowered processor prices aggressively during the first half of the year in order to counter AMD’s stepped-up competitive pressure. Even as we bring out new products with new capabilities … price will still be necessary to win back market share we lost, Bryant said.

Intel’s guidance for the current quarter included a $400m shortfall due to excess inventory in the supply chain. In part, this was due to the inventory build in the first quarter being more than twice the $300m Intel previously thought, Bryant said.

As of the end of the previous quarter, there were several million units of excess Intel inventory at customer warehouses, Otellini said. The glut could be worked down within one or two weeks, he said.

Also, an unseasonable slowdown in Europe added to the build, he said. Revenue in Europe was down 19% in the quarter, the most of all Intel’s geographies. In general, the sluggish demand seemed to be in both the consumer and enterprise business, Bryant said.

I think it was equal as well between notebooks and desktops. We just saw a very soft quarter in Europe and that was one of the reasons we saw inventory stacking up at our OEM customers, he said.

Asia Pacific also saw slow growth during the quarter, down 16%, which was substantially lower than typical seasonality along with Europe, Bryant said.

Revenue in the Americas grew 4%, while strong notebook sales helped its business in Japan grew 8%.

As a result of lower revenues, Otellini said the company would reduce its spending levels for the full year by about $1bn.

We are adjusting our spending in line with reduced revenue outlook, but not changing the ramp outlook of our new factories and product lines, Bryant said. Also, there would be no staff lay offs. Rather the company would be conservative in new hiring and cut costs around the edges, he said.