If it wasn't the general state of the economy taking a toll on Intel this quarter, the numbers from Santa Clara would send stockholders racing toward the nearest open window: Operating income nosedived 68% over the prior year's first quarter, to $670 million on $7.1 billion in revenue -- and that revenue number is less than three-quarters of what Intel was making this time last year.

But in desperate need of a plus sign, Intel is seizing upon one this afternoon: After all that cost-cutting is taken into account, net income was up 176% over the disastrous fourth quarter of last year, to $647 million. That's enough to have CEO Paul Otellini proclaiming the worst is over, telling investors, "We believe PC sales bottomed out during the first quarter and that the industry is returning to normal seasonal patterns."

We'll see whether that theory holds up after the company's quarterly analysts' call later this afternoon, where we could learn what type of adjustments accounted for that bounce. However, we've already seen evidence that one type of adjustment didn't yield the bounce that Intel usually hopes for: Even though it lumped together sales of its Atom processor -- which should be higher given the greater demand for netbooks and cheaper form-factor PCs -- with its chipsets, sales in that merged department fell 27% over the prior quarter, to $219 million.

Chipsets are not one of Intel's strong suits, and typically contribute to low margins (and 45.6% is a big tumble from 53.1% in the prior quarter), so the fact that Atom wasn't contributing enough to help flatten the losses in the small components department, is not a good sign.

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