Intel, the world's largest chipmaker, has seen its fourth quarter profits fall 39% as its price cuts continue to hurt its bottom line.
Intel and rival AMD are fighting hard for market share
Reporting its results for the last three months of 2006, Intel's net profit fell to $1.5bn (£765m) from $2.45bn a year earlier.
Meanwhile, its revenues fell 5% from the same time last year to $9.7bn.
Intel and its main rival, Advanced Micro Devices, have been involved in a price war over the past year.
Beats market expectations
Despite Intel's sharp dip in profits, the fall was expected, and the firm's results came in slightly ahead of market expectations.
Wall Street analysts had expected a fourth quarter profit of $1.44bn.
Intel now expects sales of between $8.7bn and $9.3bn in the first quarter.
A price war between Intel and Advanced Micro Devices' (AMD's) has proved to be bruising for both firms.
Over the past year, Intel has seen its shares fall in value by almost 15%, while AMD's have lost nearly half of their value.
Analyst Joanne Feeney of FTN Midwest Securities said Intel's latest results were indicative.
"It indicates to us that the competitive pressures with AMD were more severe than we had thought and that Intel continues to struggle to regain its market share," she said.