It wasn't one of Intel's best quarters in recent years as the company reported that sales were down, ASP's were down, gross margins were down, CapEx would be down, headcount would be down via a recruitment freeze and natural attrition, inventory rose and would rise further while Paul Otellini, Intel's CEO said the company would undertake the first worldwide operational review since the mid 1980's!

CapEx for 1Q06 came in a $1.8 billion US dollars but this will be cut in half for 2QO6 and possibly again in the 3Q06!

However, Intel executives reiterated that the ramp of three 300mm fabs at the 65nm node would continue on schedule and that no reduction in spending at this level would be made. Capital spending reductions would be from ‘around the edge' according to the company, but declined to provide further details.

Capital spending in the second half of the year is expected to return to previously planned levels and should only be down by $300 million US dollars from the $6.6 billion set for 2006.

Intel has been hit by a transition to dual core MPU's which have a larger die size than previous single core units as well as slowing growth in the PC market. AMD has been taking market share in the server market, which has higher margins.