Intel's Atom revenue fell more than other processors

Intel said too much inventory was the problem, expects Atom sales to start growing again.

Intel's revenue from its line of low-end Atom microprocessors fell more during the first quarter than other products, according to the chip maker's first-quarter results.

While the average selling prices of all CPUs remained unchanged compared to the fourth quarter of 2008, sales of Atom processors and related chipsets experienced a sharper decline than Intel's overall CPU and chipset sales, the company said.

First quarter sales of Atom processors and chipsets totaled US$219 million, a drop of 27 percent compared to the fourth quarter, according to the company's first-quarter financial results.

By comparison, overall sales of processors and chipsets declined 13.5 percent during the same period, dropping from $8 billion to $6.9 billion during the same period.

Intel CEO and President Paul Otellini blamed the sharp decline in Atom sales on a buildup of excess inventory, which has been cleared.

In addition, PC makers may have been waiting for the release of more powerful Atom chips and slowed their purchases ahead of this release.

Last week, Intel announced a 2GHz version of the Atom processor, the Z550, saying the chips were immediately available for hardware makers.

While the Z550 is designed for mobile Internet devices -- a term Intel uses to describe small, handheld computers -- similar versions of the Atom have made their way into netbooks, such as Sony's Vaio P series.

Atom-based computers, particularly low-cost netbooks, have been a rare bright spot for the PC industry, showing growth in recent quarters while overall PC shipments dived. Intel struggled to keep pace with demand for Atom when the chip was first released last year.

The company increased production to fully satisfy demand just as financial markets crashed and PC sales slowed to a crawl.

While excess Atom inventory slowed sales during the first quarter, that isn't likely to slow sales of computers based on the chips.

With the excess inventory gone, Atom sales are expected to increase during the second quarter, Otellini said.

(Agam Shah, in San Francisco, contributed to this story.)

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