Intel has reported a 39 per cent drop in profits during the past quarter, with its profits down to $1.5bn (£762m).
The company earned 26 cents per share and generated revenues of $9.7bn (£4.9bn). These figures are down by 5 per cent compared to the same period in 2006.
Intel's profits are affected by the restructuring within the company. The company is set to lose 10,500 staff and is due to sell off its division for communication equipment to Marvell Technology Group.
The processor giant has also lost market shares to rival AMD , but managed an upswing during the past months through successes with its Core 2 Duo and Xeon chipsets. That success was offset by soft sales of chipsets and motherboards, though, Intel said.
Last year, Dell deserted the exclusive relationship it had with Intel and started using AMD processors in some of its products.
Intel survived "a challenging year" in 2006, Intel CEO Paul Otellini said during a conference call with investors on Tuesday.
"Things look bleak," said analyst Martin Kariithi at Technology Business Research .
"Now the chip market is a two-horse race. As long as AMD is there, I don't see Intel getting to the level it once was."
In its end of year report for 2006, Intel reports a profit of $5bn. Intel's revenue was $35.4bn, down 9 per cent on the previous year.
Intel predicts better results for this year. At the end of 2007 the company will decrease its staff numbers from 102,500 to 94,100. Intel said it would invest the money gained in new product launches.