Price cuts and inventory write-offs hit Intel's bottom line in Q3 with net income falling 35 per cent year on year to $1.3bn on revenues down 12 per cent.

Still, the chip giant can afford to be a little cheerful - earlier gloom had led analysts to forecast net income of $1.02bn, excluding special items. Special items in Intel's case were $200m for the quarter. So that means consensus forecasts were out by a whopping $500m.

Intel notes record shipments of mobile and server processors, albeit at lower average prices. But it has some new quad core processors to crank up the competition with AMD's competing Opteron server line. And the manufacturing transition to .65m technology is ramping up nicely, with some 40m 65nm processors sold already.

The company has had a difficult year - as 10,000 of its former and soon to be former employees have discovered to their cost. AMD, its chief rival, has proved to be a formidable rival this year, especially in the x.86 server market. Even Dell has noticed, dropping its Intel-only policy this year to flirt with AMD.

Next year should be better. And Q4 is not looking too bad either" the company expects revenues to come in between $91.bn and $9.7bn.

Earnings statement here (pdf). ®