The world's largest computer chip maker said average selling prices for its products had been driven down during the quarter.

This was because the US firm sold more of its cheaper chips as sales of PCs costing less than $1,000 (£642) have boomed.

However Intel president and chief executive, Craig Barrett, predicted a strong second half of 1999 for sales of its computer chips.

Shares fall

Intel reported net income of $1.7bn, or 51 cents a share, compared with net income of $1.2bn, or 33 cents a share a year ago.

Despite that rise and a warning in April that the second quarter results would be flat, the consensus among analysts had been for earnings of 53 cents a share.

Its shares fell in trading after American markets closed on Tuesday, to 63.1 from an unofficial close of 65.4 on the Nasdaq market.

"As expected, second quarter revenue reflected a seasonal slowdown and we look forward to a strong second half," said Mr Barrett.

The California-based company said it expected third quarter revenues to be up slightly from the second quarter levels.

Mr Barrett said the company had regained market share in the low-cost personal computer segment with its Celeron processor during the quarter.