Intel Profit, Sales Soar in 4th Quarter
In a hopeful sign for the technology industry, Intel Corp. said Wednesday that its fourth-quarter profit more than doubled as sales rose to an all-time high.
The world’s largest computer chip maker attributed the better-than-expected results to healthy equipment purchases by businesses. Silicon Valley has been counting on a pickup in corporate capital spending to end the tech industry’s long slump.
“We saw in 2003 that people upgraded for strategic reasons ... and we saw tens of thousands more PCs deployed” by companies, said Intel President Paul Otellini. “We expect we will see more of that in 2004.”
The Santa Clara, Calif., company said it earned $2.2 billion, or 33 cents a share, in the quarter ended Dec. 27, compared with $1.05 billion, or 16 cents, a year earlier. Revenue for the quarter topped $8.74 billion, up 22% from $7.16 billion a year earlier.
The year “began with a question mark and ended with an exclamation point,” Chief Financial Officer Andy Bryant said in a conference call with analysts.
For the first quarter of 2004, typically a slow one for technology companies, Intel expects sales of $7.9 billion to $8.5 billion, Bryant said.
That forecast was more tepid than analysts had expected, sending Intel shares down to $32.45 in after-hours trading. The stock closed at $33.39, off 20 cents, in regular Nasdaq trading before the earnings were released.
Still, as companies, universities and government agencies continue to buy new PCs and hefty server computers, Intel should be well-positioned to cash in, said Tai Nguyen, a semiconductor analyst in San Francisco with the institutional brokerage Susquehanna Financial Group.
“This is the year for the PC replacement cycle,” said Nguyen, who doesn’t own Intel shares.
That sentiment was bolstered by a report released Wednesday by technology market researcher IDC that said worldwide PC shipments grew 11.4% in 2003, accelerating to 15.2% in the fourth quarter. Hewlett-Packard Co. was the top seller for the fourth quarter, but Dell Inc. won the crown for the full year, according to the report.
Growth in the PC market is good for Intel, since about 80% of the machines contain its chips.
Intel also stands to benefit from years of heavy investments in new factories that can churn out more powerful chips at lower cost, analysts said.
“Certainly they’re at the right place at the right time with all the investments they’ve made in the last three years in new technology and manufacturing capability,” said James Ragan of brokerage Crowell, Weedon & Co. in Los Angeles.
“They’re in a good position at a time when the PC market seems to be exceeding expectations,” said Ragan, who owns Intel shares but whose firm does not have a banking relationship with the chip maker.
Intel’s record revenue offered encouragement to analysts who have been seeking evidence that the technology industry has emerged from its three-year downturn.
“It’s been the mix of products that’s allowed them to see record revenue,” said Steve Kleynhans, a Toronto-based analyst with Meta Group. In addition to bread-and-butter PC chips, Intel had strong sales of its Centrino wireless chip package and microprocessors for low-end servers, he said.
For the full year, Intel earned $5.6 billion, up 81% from $3.1 billion in 2002. Earnings per share for 2003 rose to 85 cents from 46 cents the previous year, and revenue was $30.1 billion, up nearly 13% from $26.8 billion.
Intel’s Otellini added that the company expected to profit from computer makers’ recent strategy of selling consumer electronics items such as television sets and DVD players, which pack increasing amounts of computing power.
“We believe the fundamental dynamics that drove the PC revolution are similar for consumer electronics ... and will drive our silicon into various CE devices,” he said.
