But at least in the short term, the chipmaker's stock shouldn't be hurt solely by the action, because it came as no surprise, some analysts said. Likewise, Microsoft's stock has held up fairly well despite the antitrust lawsuit filed against it last month.
On the Nasdaq, Intel topped the list of most active stocks with 17.6 million shares trading hands. The stock lost 50 cents to end at 69.38. The company's stock has traded as high as 102 in the past year, and it has continued to lose ground as the company continues to seep bad news.
Intel's chips are inside more than 80 percent of the world's PCs, and its stronghold on the market moved the FTC to vote to sue the chipmaker, charging the company with using its market dominance to hurt rivals and hamper competition in the computing industry.
Intel countered that the lawsuit was based on a mistaken interpretation of the law and the facts.
One industry analyst said Intel's stock will rebound even with this investigation because the company has been investigated by the FTC for nearly a year and no one should be surprised by the suit.
In addition to legal woes, Intel is facing slower growth as the demand for personal computers eases from the 20-plus percent growth of recent years and pricing pressure as computer prices fall below $1,000.
The company took the falling prices--which have hurt margins--head on today by releasing a new 300-MHv version of its Celeron microprocessor for budget computers.
And getting into the growing low-cost personal computer market is one of the biggest challenges facing the company right now, the analyst said, noting that it is the key issue that will drive Intel's recovery.
Longer term, the potential is there for the average selling prices of personal computers to start growing again once technologies such as ADSL (asymmetric digital subscriber line) hit the market and allow people to gain access to more information at faster speeds, he said.
Intel said last week that there would be a delay in its Merced chip project--a key component of the company's future server and workstation sales. While the delay adds some uncertainty to the company's outlook, some analysts say it was a not big blow to the giant semiconductor manufacturer because it was not counted to be a major revenue source for now.
It did cause a wave of downgrades and lowered earnings per share projections, however.
That momentum continued today as Salomon Smith Barney lowered its second-quarter earnings to 65 cents per share from 72 cents per share, and its revenue estimate for the quarter to $5.6 billion from $5.9 billion, excluding unusual items. The firm maintained its "buy" rating, however.
An expected, reduction in personal computer channel inventories in the second quarter was the basis for the change, the analyst said in a research note, adding that a rebalancing of PC channel inventories could pave the way for a significant improvement in second-half 1998 results.
Intel is an investor in CNET: The Computer Network.
Reuters contributed to this report.