UPDATE 1-Intel says EU fine won't lead to dividend cut

* Says cash flow sufficient to pay fine and invest

* Sees netbook cannibalisation at about 20 percent

* Says worldwide inventory levels at healthy levels

By Georgina Prodhan and Paul Sandle

LONDON, May 27 (Reuters) - Intel Corp (INTC.O: Quote, Profile, Research), 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 showed analysts a slide indicating the company would spin off more than $10 billion in cash in 2009, flat or slightly down on 2008.

Intel addressed analyst fears that growing sales of its lower cost "Atom" processor, which is used in netbooks, would cannibalise sales of its PC chip range and put downward pressure on its former lofty 50-60 percent margins.