At the same time, Intel shares tumbled after influential Merrill Lynch analyst Tom Kurlak said there are currently more microprocessors than the PC market needs.

Kurlak also said Intel could cut more jobs, in addition tothe 3,000 job cuts the Santa Clara, Calif., semiconductor giant announced last month.

Intel, however, said it was not likely that any further jobreductions would be made.Intel also announced on Friday that Frank Gill, theexecutive who headed its small business and networking group, will retire in June.Intel shares plunged $4.25 to $80.31 in active trading on Nasdaq, pulling down other chip makers and PC makers, in particular rival clone chip makers National Semiconductor Corp and Advanced Micro Devices Inc.

AMD slipped $2.25 to $22.875 and National fell 15 per cent, dropping $3.19 to$17.31 on the New York Stock Exchange.

Many Wall Street analysts were cutting estimates for National Friday. The company late Thursday had predicted a fourth-quarter operating loss, in part due to slowing shipments to personal computer makers as they correct inventories, and a 20 per cent drop in revenues.

"The PC-centric business has been contracting for several quarters now as PC prices have fallen and overall unit growth has slowed," Kurlak said in a note to clients.

Intel's reorganization of its fast-growing small business and networking group will separate the networking business into a stand-alone business, called the Network Products Business, reporting to Intel's executive office, giving it a higher priority.Gill, 54, who is retiring June 1, is executive vice president and general manager of that group. The revamping includes a new business group to focus on diversification.

"It has become increasingly clear that we must continue to focus on our core Intel architecture and diversify into newbusinesses if we are to re-energize Intel's growth in the future," Intel President Craig Barrett said in a statement.

Intel said its new operational group will be called the New Business Group, to focus on growing new market opportunities, amid serious pressures on Intel's flagship microprocessor business after years of uninterrupted growth.

The New Business Group will be headed by Gerhard Parker, former head of Intel's manufacturing.Parker's new group will combine Intel's digital imaging video division, its Internet services operation, called Answer Express, business communications products, systems management division, home networking operations and Pandesic LLC, a venture with SAP AG.

Intel said Parker will be replaced by Mike Splinter, vice president and assistant general manager of technology manufacturing group and Sunlin Chou, vice president of components technology. Each executive will become co-general manager of Intel's technology and manufacturing group.

Intel said Gill wants to spend moretime with his family after 23 years at the company where he started out in 1975 in sales. In February, Gill filed a registration statement with the US Securities and Exchange Commission to sell 390,664 shares of Intel's stock, valued at $30 million.

As PC prices have continued to plunge amid a glut of inventories, Intel has been dropping prices of its microprocessors, the brain chips of PCs, at a furious pace in recent months. PC units are still growing at a rate of 14 per cent to 15 per cent, but last month, Dataquest forecast that for the first time since 1986, 1998 PC revenues will slow to 6.4 per cent.