Intel has reported $8.7bn in sales and $1.3bn in net income for its second fiscal quarter, despite lower than expected profit margins and sagging Flash sales. 

The figures represent an eight per cent boost in sales revenue and a 44 per cent boost in income compared with the same period a year ago.

At that time Intel was in the middle of staff cuts that would ultimately lead to the proposed elimination of 10,500 positions by 2008. 

Intel chief executive Paul Otellini was upbeat about the figures. "We are pleased that our efforts to streamline the company are delivering profit growth in excess of revenue growth," he said.

Despite these efforts, the chip firm still saw its gross margin fall below expectations to 46.9 per cent.

Intel blamed this on lowered prices for its microprocessors and slowing demand for its Nor Flash chips. The company hopes to raise the margin to 52 per cent by the end of the next quarter.

Intel plans to spin off its Nor business in a joint venture with STMicroelectronics by the end of the year. 

Otellini singled out the low-end of the PC marketplace as an area where profits were particularly slim and competition fierce. Intel has long been locked in a war with AMD for the enterprise and consumer PC CPU markets. 

Intel has had an advantage over its rival since it began shipping its quad-core chips in January, driving sales and pushing AMD into the red. 

However, Intel could lose its edge later this year when AMD releases a quad-core range which some experts believe is a superior design to current Intel offerings.