High expectations at a time when Intel is under increased pressure from rival AMD spelled bad news on earnings day.

Despite record revenues and income from record unit shipments the company’s shares fell nearly 10 per cent in after hours trading.

Apart from missing its expected earnings by US$200 million, the processor maker also forecast slowing demand in 2006 after three years of solid growth in the sector.

However, a key indicator of whether Intel has lost significant desktop processor marketshare will be revealed tomorrow when rival AMD posts its fourth quarter results in the US.

Indications from late third quarter and early fourth were that AMD was making significant gains on the CPU giant.

Intel’s results weren’t so bad, though. The company posted fourth quarter revenue of US$10.2 billion (up 6% YOY) and an operating income of US$3.3 billion (up 13% YOY). Net income was US$2.5 billion (up 16% YOY). The trouble was this figure fell well sort of the company’s own estimate of US$10.4 to $10.6 billion.

Full year results were healthy with a US$38.8 billion revenue result and operating income of US$12.1 billion. Net income was US$8.7 billion.

Gross margin was 61.8 per cent, slightly below the company’s 63 percent expectation and the company expects this may fall as low as 57 per cent (plus or minus) this calendar year.

Get the full earning statement here.