Intel 4th-quarter revenue misses outlook
Even after sharply reducing its outlook for the fourth quarter, Intel Corp. said Wednesday that it would miss its revenue projection by about $500 million, a sign that personal computer makers and buyers were being more tightfisted than they seemed only two months ago.
Intel shares closed down 6.1%.
Intel, the world’s largest chip maker, now says revenue was $8.2 billion for the last three months of 2008, a 23% decline from the year-earlier period. Analysts surveyed by Thomson Reuters were expecting $8.7 billion, which was at the low end of the range Intel provided in November of $8.7 billion to $9.3 billion.
Profit at the Santa Clara, Calif., company is also being hit. Intel expects its gross profit margin to be at the bottom of its previous guidance, which was for 53% to 57% of revenue. Gross profit is the amount of money a company earns after manufacturing costs are stripped out. It’s a valuable gauge of how well companies are controlling their costs and is particularly useful when looking at chip makers since their manufacturing expenses are huge.
The fact that Intel has had to revise its fourth-quarter guidance twice indicates how deeply the economic meltdown has damaged the semiconductor industry. It also reveals how hard it is for even conservative companies -- Intel formally stopped doing mid-quarter updates in 2006 -- to figure out how badly they’re being hurt.
Intel blamed the latest revision on weaker-than-expected demand. Businesses are putting off upgrading to new computers until the economy and their finances improve. And consumers, singed by layoffs as well as falling home prices and stock portfolios, have scaled back their spending. That in turn has prompted PC makers to try to save money by burning through their existing inventories of chips instead of buying new ones.
These trends have slammed chip makers since the downturn intensified in September and appear to be worsening.
The news came as little surprise to industry analysts, who have been warning for months that PC suppliers such as Intel might miss even their lowered forecasts.
“It’s not something that indicates any kind of share loss or structural change in the company or the markets,” said Cody Acree, senior semiconductor analyst at Stifel, Nicolaus & Co. “Right now the economy is causing everybody up and down the manufacturing channel to live hand to mouth.”
More details will emerge when Intel reports its full quarterly results Jan. 15.
The company’s primary competitor in the market for microprocessors, which are the brains of personal computers, has also slashed its forecasts. Advanced Micro Devices Inc. of Sunnyvale, Calif., warned last month that its fourth-quarter sales would drop 25% from the previous quarter. That implies a drop of 33% from a year earlier.
Intel shares fell 93 cents to $14.44. AMD shares fell 12 cents, or 4.3%, to $2.66.
Intel also needs to absorb a charge for the deterioration of the value of its investment in Clearwire Corp., an Internet provider specializing in a new type of wireless broadband technology called WiMax.
Intel, which invested $1.6 billion in Clearwire, plans to take a $950-million noncash charge in the fourth quarter because of Clearwire’s falling market value. Clearwire’s stock price has fallen from around $12.50 in October to $4.98, leaving the company with a market capitalization of $833 million. Questions have circled about Clearwire’s aggressive network build-out plans in the souring economy.
