Santa Clara (CA) - Intel today reported fourth quarter 2006 revenues of $9.7 billion, down about 5% from last year. Net earnings came in at 1.5 billion, down a dramatic 39% from $2.5 billion in Q4 2005. But Intel appears to have turned the corner, shows signs of recovery - thanks to the success of its Core microprocessors.

Intel’s Q4 result is a mixed bag that, while Intel shows first signs of recovery, still includes enough reasons for analysts to remain somewhat cautious about the firm’s near future. Compared to the third quarter, Intel reported improvements in the traditionally stronger Q4 ; Revenues were up 11% while net earnings improved by 15%. But the company isn’t quite back at the financial performance it showed a year ago and the 2006 fiscal year clearly shows how much the company was hurt by the success of rival AMD : Total sales were $35.4 billion, down about 9% from 2005 and net income was about $5 billion, down about 42%.

However, in the most recent quarter, Intel was able to increase its gross margin from 49.1% to 49.6%, which according to the company, was a result of higher microprocessor sales and higher average selling prices. On the downside, Intel took factory underutilization charges along with flash memory write-downs and start-up costs in the NAND flash joint venture with Micron.

Intel is apparently ahead of its restructuring plan and ended 2006 with 94,100 employees, slightly below the target of 95,000. The company had reached a high of 102,500 employees in Q2 of 2006.

Intel said that microprocessor unit sales set a record. Average selling prices increased due to a "mix shift to leading-edge processors" as well as a continuing trend towards higher-priced mobile processors. That note suggests that Intel in fact was able to maintain the higher-end of the mainstream processor segment and push AMD into lower regions : AMD warned investors a few days ago that the average selling price of its processors dropped in Q4.

According to a press release, Intel completed the development of its 45 nm process technology during Q4 2006 and is on track to ship 45 nm processors from three factories in the second half of this year. First samples of the 45 nm Penryn processor were produced during the quarter and booted Windows Vista, Mac OS X and Windows XP, Intel said.

More than 70 million 65 nm processors left Intel’s factories in 2006 ; dual-core processor represented a share of "greater than 50%" in Q4, the firm said.

Intel expects Q1 2007 revenues to be "between $8.7 billion and $9.3 billion," with the medium being slightly above the Q1 2006 result ($8.9 billion).

Intel stock was down almost 3% in after market trading on Tuesday.