Chip Maker Intel Reports Surprise Jump in Earnings
In a sign that the worst may be over for the troubled technology sector, chip maker Intel Corp. on Tuesday reported stronger-than-expected fourth-quarter earnings amid increased semiconductor sales and signs of recovery in Asia and Europe.
Intel, the world’s biggest chip manufacturer, said it earned $1.05 billion, or 16 cents a share, in the last three months of 2002, more than double the $504 million, or 8 cents a share, it earned in the same period in 2001. Quarterly revenue was $7.16 billion, up from $6.98 billion a year earlier.
For the full year, Intel reported profit of $3.1 billion, or 47 cents a share, a 140% increase over the $1.3-billion profit it posted in 2001. Annual revenue climbed marginally, to $26.8 billion from $26.5 billion.
The Santa Clara, Calif.-based firm said it gained market share in most of its businesses despite sluggish corporate spending.
“This is very, very solid in a very difficult environment,” said analyst John Lau of RBC Capital Markets. “They grew the business and were able to control their costs, and that’s quite good especially in this market.”
Just two years ago, Intel reported record annual profit of $10.5 billion for 2000. Since then, demand for chips has slumped while businesses and consumers held back on purchases of personal computers, servers and other high-tech gear.
Intel executives took pains Tuesday to emphasize that the surprising fourth-quarter pickup doesn’t necessarily mean that the chip industry is on the rebound.
They did, however, point to pockets of strength. During a conference call with analysts, President and Chief Operating Officer Paul Otellini said that although the U.S. economy and the information technology market have yet to show a significant resurgence, there was some recovery in Europe in December, and growth was robust in Asia throughout 2002.
“Asia has been breaking out at the seams all year, and in the prior year as well,” Otellini said. “It’s been one of the clear, positive signs of growth for us, and I do not see that abating.”
Intel increased its market share in several of its main product segments, including computer microprocessors, chip sets, graphics chips, motherboards, flash memory and microprocessors for hand-held computers and high-speed Ethernet connection hardware.
The gains reflected stronger demand than Intel had anticipated at the beginning of the quarter. Also on Tuesday, Merrill Lynch forecast semiconductor revenue growth of about 12% this year.
Intel shares rose 41 cents to close at $17.79 in Nasdaq trading Tuesday before the earnings were released. The shares topped $18 in after-hours trading before settling at $17.93.
Chief Financial Officer Andy Bryant said first-quarter revenue this year probably will be $6.5 billion to $7 billion. But he and Otellini were cautious about the full year. As a result, they said Intel would cut its budget for capital spending in 2003 to $3.5 billion to $3.9 billion, down from $4.7 billion last year.
“In 2003, we will continue to deploy advanced technology ... and improve our competitiveness and cost structure so we can continue to outperform now and when the economic picture improves,” Chief Executive Craig Barrett said in a statement.
Technology executives at Intel and elsewhere are anxious about when the U.S. economy will get back in gear. They believe an upturn will prompt companies to renew spending on information technology products such as computer workstations and networks.
