SAN JOSE, Calif. - Intel Corp.'s second-quarter profit jumped 44 percent on strong sales of microprocessors, but the company's shares fell amid signs that fierce competition continues to push chip prices lower.

Shown is the Intel logo outside their Robert N. Noyce building in Santa Clara, Calif., Monday, July 16, 2007. Intel Corp. reports second-quarter earnings on Tuesday, July 17, 2007. [AP]

Intel's stock price had risen 29 percent since the start of the year, hitting a new 52-week high of $26.33 before the earnings were released Tuesday. The stock fell nearly 5 percent to $25.05 in after-hours trading.

Cody Acree, senior semiconductor analyst with Stifel, Nicolaus & Co., said some investors may have been expecting too much from the company in the second quarter.

"It's a case of the stock having done so well, the expectations were probably unrealistic, at least as far as something in the summer months that would drive continued momentum," he said, adding that Intel's financial outlook is promising.

Intel, the world's largest semiconductor company, said net income for the three months ended June 30 was $1.28 billion, or 22 cents per share, compared with $885 million, or 15 cents per share during the same period last year.

Were it not for one-time tax gains, the Santa Clara-based chipmaker's profit for the latest quarter would have been lower by 3 cents per share. Analysts surveyed by Thomson Financial were expecting Intel to earn, on average, 19 cents per share.

Intel exceeded analysts' revenue expectations, ringing up $8.68 billion in the second quarter, an 8 percent increase over the $8 billion it reported in the same period last year.

But investors seemed unhappy with the company's closely watched gross profit margin, which fell to 46.9 percent of revenues - at the low end of the company's forecast - because of lower microprocessor selling prices and weak demand for NOR flash memory chips, which are primarily used in cell phones. Intel is in the process of unloading its troubled NOR flash division.

"It got a little tougher in the second quarter than we expected, but it's pretty consistent with our outlook," Andy Bryant, Intel's chief financial officer, said in an interview with The Associated Press. "We believe our best defense against pricing pressure is more and more product differentiation."

Price-cutting has hurt profits at Intel and its smaller microprocessor rival, Advanced Micro Devices Inc.

However, Intel has been able to withstand the pressure better because of its size - Intel's $153 billion market value is 18 times as big as Sunnyvale-based AMD's - and because of its faster transition to a more advanced chip-making process that boosts chip performance while lowering manufacturing costs.

AMD, whose stock price has fallen 19 percent since the start of the year, is scheduled to report its second-quarter results Thursday.

For the third quarter, Intel expects revenue between $9 billion and $9.6 billion - in line with analyst estimates - and gross margin of 52 percent of revenue, plus or minus a couple of percentage points.