Intel profits sink 90% in Q4

Offers vague outlook for Q1 2009


Investors had time to brace themselves for Intel's atrocious fourth quarter earnings, since the chip maker warned of revenue drops twice in the past three months.

That's why Chipzilla's profits plummeting 90 per cent in the quarter was actually in line with Wall Street's dismal estimates. The company reported net income of $234m for the thee months ending December 27. That's down from $2.27bn in the same period last year.

Intel blames the profit loss on lowered demand a billion-dollar write off of its stake in the WiMax service provider Clearwire.

Revenue in the quarter dropped 23 per cent to $8.2bn, down from $10.7bn from a year ago. Intel said as global demand for computers stalls, PC makers are working through their current inventory rather than purchasing new chips.

"The economy and the industry are in the process of resetting to a new baseline from which growth will resume," said CEO Paul Otellini in a statement. That sounds like a nice way of saying they haven't hit bottom yet.

"While the environment is uncertain, our fundamental business strategies are more focused than ever. Intel will continue to extend its manufacturing leadership, drive product innovation, develop new markets, and implement operating efficiencies that have already taken more than $3 billion out of our ongoing cost structure since 2006," he continued. "Intel has weathered difficult times in the past, and we know what needs to be done to drive our success moving forward. Our new technologies and new products will help us ignite market growth and thrive when the economy recovers."

Everyone knows by now that Q4 stank for the tech sector – and for just about everyone else, as well. What folks really wanted from Intel was an indication that the shutdown in demand is loosening up in 2009.

Intel said it isn't providing a revenue target for the upcoming quarter – citing "economic uncertainty and limited visibility." Instead it offered a figure "for internal purposes," that's "in the vicinity of $7 billion." But that's technically a forecast, right?

During Q4, chip and chipset unit shipments were "significantly lower" versus the third quarter. Revenue from Intel's low-cost Atom chips was up 50 per cent to $300m. Intel said Atom's sales weren't hit as hard as others because manufacturers have less of the chips in inventory to work through before ordering more. Excluding Atom, the microprocessor average selling price (ASP) was higher – but including Atom, the ASP was flat.

For the full year, Intel posted revenue of $37.6bn, down 2 per cent from 2007. Operating income was $9bn, a 9 per cent gain from the previous year. Net income was $5.3bn, down 24 per cent versus 2007.

Intel said it removed more than $800m of cost from the company in 2008 under the restructuring plan it launched in 2006. Cumulative spending reductions exceed $3 billion to date. ®

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