Intel says it will end production in August

Intel Corp plans to end production in August at its 900-employee Colorado Springs semiconductor plant, a company official confirmed Tuesday.

The California-based chip giant also told stockholders Tuesday that it expects to spend $60 million by the end of June on employee severance and benefit costs at its 1.4 million-square-foot plant at 1575 Garden of the Gods Road and other facilities.

Three months ago, Intel cut the value of the land, buildings and equipment here and in other locations by $214 million. Tuesday, Intel reduced the value of those assets by another $54 million, citing “softer than anticipated market conditions,” according to a filing with the U.S. Securities and Exchange Commission. Intel did not say how much of the write-down applies to its local operation.

Judy Cara, an Intel spokeswoman in Colorado Springs, discussed the plant’s production plans after the company reported Tuesday that its first-quarter profit surged 19 percent. She first disclosed the plant’s projected closing date on April 4.

“It looks unlikely the end of production will extend beyond August,” she said. “That hasn’t stopped any of the work to sell the facility. We are marketing the plant as an operating facility and there is still interest.”

If the plant is not sold by the time production ends, Cara said there is “a strong possibility” Intel would begin laying off employees and closing the plant. She said the company could still sell the plant but with fewer employees.

At its Springs plant, Intel produces communications and application processors for Marvell Technology Group Ltd. Marvell bought Intel’s specialty-chip business for $600 million in November and plans to move production from here to an overseas manufacturer.

Intel said a new chip-making process and a big tax windfall helped it withstand another round in a fierce price battle with rival Advanced Micro Devices Inc.

Intel also raised its full-year profit-margin forecast and said it will spend slightly more on research and development in 2007 than the company had previously forecast. Meanwhile, AMD has slashed its revenue forecast and is expected to post a loss of 48 cents per share when it reports its firstquarter results Thursday.

Both Silicon Valley companies make the microprocessors that act as the core calculating engines of computers and are cutting prices to gain market share.

Intel, however, has been able to throw more money at improving the manufacturing technology that makes production cheaper while boosting performance. Intel also has been better able to absorb the price cuts because of its size advantage — its market value is 16 times that of AMD’s.

Intel said after the market closed Tuesday that it earned $1.61 billion, or 27 cents per share, in the first three months of the year. That compares with net income of $1.36 billion, or 23 cents per share, in the same quarter last year.

The Santa Clara-based company said the latest profits include a reversal of $300 million of previously accrued taxes that were added back into the company’s coffers. It increased the earnings per share by about 5 cents.

The tax benefit stemmed from Intel’s resolution of a dispute with the IRS over its method of accounting for certain export sales. The IRS had wanted to hit Intel with more than $2 billion in charges for back taxes from 1999 to 2005, but the two sides resolved the matter for an undisclosed sum.

Intel said revenues for the quarter were $8.85 billion, down slightly from last year’s $8.94 billion. Analysts surveyed by Thomson Financial were expecting the company to earn, on average, 22 cents per share on nearly $9 billion in revenue.

Sales were down across the board in all of the company’s major divisions, and average selling prices were lower in the lucrative market for corporate server processors.

Intel, however, was able to offset slumping sales with lower manufacturing costs because of its shift to a more advanced manufacturing technology.

Intel had had about a year’s head-start over AMD in producing chips using so-called 65-nanometer technology, which shrinks the size of a chip’s circuitry to 65 billionths of a meter. The shift allows companies to squeeze more transistors onto the same slice of silicon, boosting performance while lowering manufacturing costs. Both companies are now shifting to 45-nanometer technology.

“The market remains competitive, but we think we’re starting to see the benefit of the new products we rolled out last year,” Andy Bryant, Intel’s chief financial officer, said in an The Associated Press interview. “As we bring better and better products to the marketplace, it gives us the ability to compete on something more than price.”

Intel shares gained 29 cents, or 1.4 percent, to close at $20.98 on the Nasdaq Stock Market. In extended-session trading, they gained 9 cents.