After a 38% profit drop in the first quarter of 2006, from $2.18 billion a year ago to $1.35 billion this year, Intel starts looking for solutions.

Considering the profit loss and the slow sales growth in the PC market, Intel CEO Paul Otellini said that there would be major changes in the company to improve efficiency. Intel will try increasing employee productivity and implementing immediate changes to underperforming business units over the next 90 days.

Otellini also stated that this restructuring will focus on every aspect of the chip maker’s operations. “No stone will remain unturned or unlooked at,” claimed the CEO. “You will see a leaner, more agile and more efficient Intel Corp.”

Intel underwent a similar change under Otellini’s direction two years ago, which resulted in several project terminations such as LCoS research. Flash memory looks to be one of the largest projects on Intel’s cutting board, losing over $100M USD in Q1’06 alone.

Intel will also be introducing three new chips over the summer to refresh its product lines. Woodcrest for servers will be released in June, Conroe for desktops in July and Merom for notebooks in August.

I think that Intel hopes that all the problems will be solved as soon as the new processors will hit the market. Till then they dropped the prices on the Pentium D series and now Pentium D 940 and X2 3800+ from AMD offer approximately the same performance while the first is $40 cheaper.

Another problem is Woodcrest, the new processors meant for the server market. It will have to be qualified because it’s a new generation. Qualifying takes anywhere from 6 months to 1.5 years, depending on how mission-critical the system needs to be. This is (for example) why it took Opteron so long to penetrate the server marketplace. And they need to prove that Woodcrest can take Opteron market.

What will Intel do in future? Will use its old tactics of trust or will they try to compete fairly with AMD?