Intel says EU fine will not lead to dividend cut

* Says cash flow sufficient to pay fine and invest

* Says worldwide inventory levels at healthy levels

LONDON, May 27 (Reuters) - Intel Corp INTC.O, the world's largest chipmaker, said the record 1.06 billion euro ($1.5 billion) fine imposed by EU regulators for antitrust violations would not cause it to cut investment or slash its dividend.

“There’s still plenty of cash flow from operations to invest in our business, pay the fine and pay the dividend,” Chief Financial Officer Stacy Smith said at an analyst event in London on Wednesday.

“As we’ve said in the Q1 earnings call, we are not having any conversations about cutting the dividend.

Smith said the current economic downturn was following the pattern of previous slowdowns, with the exceptional that Intel had reacted swiftly to cut capacity as sales slowed and inventory rose in the fourth quarter.

“We brought down the loadings in our factories dramatically to below 40 percent,” Smith said. “Pretty much in one quarter we were able to get inventory back to a healthy level.

“The inventory levels overall through the worldwide supply chain now are at a healthy, even a little bit lean, level,” he said.

Smith reiterated comments made two weeks ago at an investor meeting in Silicon Valley that gross margins would return to “normal” levels in the second half.

“I think we will get gross margin back into the normal range, which I’ll define as 50 to 60 percent, when we get in the second half of this year,” he said.

“That’s as a result of the abatement of start-up costs, but more importantly the fact that we are reloading factory network and the excess capacity charges should be less.”

Intel’s gross margin slid to 45.6 percent in the first quarter from 53.1 percent in the fourth quarter.

($1=.7172 Euro)

(Reporting by Paul Sandle; editing by Karen Foster)

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