Intel Profit Drops 90% on Writedown, Shrinking Demand (Update1)

Intel Profit Drops 90% on Writedown, Shrinking Demand (Update1)
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By Ian King

Jan. 15 (Bloomberg) -- Intel Corp., the world’s biggest maker of semiconductors, said fourth-quarter profit dropped 90 percent after the recession curbed demand and forced the company to write down the value of its investments.

Net income fell to $234 million, or 4 cents a share, from $2.27 billion, or 38 cents, a year earlier, the company said today in a statement. Revenue tumbled 23 percent to $8.23 billion, Intel said, echoing a preliminary report last week. The results included a writedown of about $1 billion in its investment in Clearwire Inc.

Intel faces its worst slowdown since the 2001 slump that followed the dot-com bust. As demand for personal computers stalls, manufacturers are working through their existing supplies of chips, rather than ordering new ones. Chief Executive Officer Paul Otellini, 58, has said this recession may turn out to be the worst of his lifetime.

“It’s very difficult to say when demand comes back,” said Daniel Berenbaum, an analyst at Auriga USA in New York. He recommends selling the shares. “When demand goes away, suddenly inventory that you thought was enough becomes an awful lot.”

Intel, based in Santa Clara, California, rose 32 cents to $13.61 in late trading after closing at $13.29 on the Nasdaq Stock Market. The stock lost 45 percent of its value last year.

No Sales Forecast

Intel declined to give its usual sales forecast, saying the current economy makes it difficult to predict demand. For internal purposes, the company said it was assuming revenue of $7 billion in the first quarter. Analysts had estimated sales of $7.18 billion on average in a Bloomberg survey.

“The economy and the industry are in the process of resetting to a new baseline from which growth will resume,” Otellini said in the statement. “While the environment is uncertain, our fundamental business strategies are more focused than ever.”

Intel’s gross margin, the percentage of sales remaining after taking out production costs, was 53 percent last quarter. This quarter the figure will be in the low 40s, reflecting a slowdown in production and a switch to a new manufacturing technology.

Analysts had predicted fourth-quarter earnings of $245.3 million, or 4 cents a share, according to the Bloomberg survey. For 2009, sales will be $30.5 billion, down about 20 percent from 2008, they predict. That would be the worst decline since 2001.

Earnings Season

Intel is the first big technology business to make a full earnings report for last quarter, kicking off two weeks of announcements by companies such as International Business Machines Corp,Microsoft Corp. and Google Inc. Intel’s processors are the key component in more than 80 percent of the world’s PCs, making its financial performance an indicator of global demand for technology.

Otellini sought to maintain growth by introducing a new line of low-cost chips called Atom last year. The success of that product may be putting Intel’s profitability at risk, according to Betsy Van Hees, an analyst at Caris & Co. in San Francisco. The cheaper processor helped give rise to so-called netbook machines, small notebook computers that sell for less than $500.

Intel may get a bigger chunk of sales from the chips, dragging down its overall gross margin, Van Hees said in a report. The company predicted a margin of 51 percent in 2009.

To contact the reporter on this story: Ian King in San Francisco at [e-mail]

Last Updated: January 15, 2009 16:36 EST

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• 哦，睡不着？ -sigma- ♂ (0 bytes) () 01/15/2009 postreply 14:20:22

• 不灌水了，刚才看的新闻，下一步intel估计要裁员了 -猫狗大战- ♀ (0 bytes) () 01/15/2009 postreply 14:22:15

• 公司大，人多的缺点。 -sigma- ♂ (0 bytes) () 01/15/2009 postreply 14:24:52