sjohnson@mercurynews.com

SANTA CLARA -- Intel (INTC) on Wednesday reported second-quarter earnings that met Wall Street's expectations, but were significantly worse than the same period a year ago.

The Santa Clara giant said it recorded a $2 billion profit, which was down 29 percent from a year ago, and had sales of $12.8 billion, representing a 5 percent drop. Its earnings worked out to 39 cents a share.

Analysts surveyed by Thomson Reuters generally had expected 39 cents a share on sales of about $12.9 billion.

It was the first earnings report under the leadership of Brian Krzanich, who was named CEO in May to replace Paul Otellini, and the new boss issued an optimistic assessment of Intel's prospects.

"The last two months have been exciting for me," he told analysts during a conference call, noting that after meeting with customers and others, he's "more enthusiastic and confident than ever" about the company's future.

Nonetheless, Intel Chief Financial Officer Stacy Smith cautioned that "the overall PC market segment is expected to be weaker than we forecast at the beginning of the year." He also said the company has trimmed its planned spending on factories and other building projects by $1 billion, bringing the total to $11 billion.

Intel's shares, which had fallen 10 cents to $24.15 at the market's official close before the earnings announcement, dropped another $1.04 in after-hours trading.

As the world's biggest chipmaker in terms of revenue, Intel long has been one of the valley's most successful corporations and its earnings reports are widely regarded as a barometer of the overall tech industry's health. But its business has begun to struggle in recent years. After hitting a peak of $14.2 billion in the third quarter of 2011, its quarterly sales have consistently remained below that figure.

Its biggest problem is that it gets about two-thirds of its revenue by selling chips for personal computers, whose sales are slowing as consumers shift to smartphones and tablets.

Manufacturer shipments of personal computers are expected to drop nearly 11 percent this year compared with 2012, while mobile phone shipments are expected to grow by more than 4 percent and tablets by 68 percent, according to research firm Gartner.

Consequently, Intel has been working hard to get its chips into mobile devices. It has made considerable progress in the past couple of years reducing the energy consumption of its circuits, making them more desirable for smartphones and tablets, where long battery life is essential. Yet the mobile-chip market is largely controlled by other companies, and Wall Street has been of a mixed mind about Intel's prospects for the immediate future.

In a note to their clients Wednesday, analysts with FBR Capital Markets praised Intel's strategy of regularly boosting the performance of its chips by squeezing more and more transistors onto smaller pieces of silicon.

"Moving forward," they said, "we are increasingly confident that Intel can opportunistically extract value from the extra transistors afforded to it through the best silicon manufacturing operations in the world."

In a separate note, Wells Fargo analysts said they found a glimmer of good news in their recent survey of 300 information technology "decision makers" in the U.S. and Europe. While only 14 percent of the respondents planned to upgrade their computer servers this year, the analysts said, sales of servers containing Intel's microprocessors "are expected to do better, which bodes well" for the chipmaker.

But in his latest report on Intel, Stacy Rasgon of Bernstein Research expressed a concern echoed by some other analysts that the company's push into smartphones and tablets could backfire by cutting into its revenue. With the sales price of mobile chips much lower than for PC chips, he said, "the company faces significant structural risks" to its business.

Contact Steve Johnson at 408-920-5043. Follow him at Twitter.com/steveatmercnews.