Intel, the world's biggest chipmaker, has reported a drop in quarterly profits and cut its annual forecasts.
Intel held on to its market share despite tough competition
Net profit in the first quarter was $1.35bn (£839m) compared with $2.18bn in the same period a year earlier. Sales fell to $8.94bn from $9.43bn.
However, the decline was less than many analysts had expected and Intel said it was performing better against rival Advanced Micro Devices (AMD).
That pushed Intel shares 1.5% higher during extended trading in New York.
Intel has been under pressure in recent quarters as demand for its products has declined and rivals like AMD have eaten into its market share.
The company, which puts it chips into almost nine out of every 10 computers sold, has cut prices in order to buoy demand and said it is seeing the benefits of the move.
"We held market share in units in the quarter," said Intel's chief financial officer Andy Bryant.
The improvement has come too late to save Intel's full-year sales targets and the company said it now expects revenues to decline by 3% in 2006 from a year earlier. In January, it had seen sales rising by as much as 9%.
Intel is planning to launch a number of faster, more efficient chips later this year and until then analysts warned that both its earnings and share price performance were likely to be volatile.
"We're in for a rough quarter with Intel," said Eric Ross, an analyst at ThinkEquity Partners.