Intel posts 90% drop in fourth-quarter profit
By Benjamin Pimentel, MarketWatch
Last update: 6:04 p.m. EST Jan. 15, 2009
SAN FRANCISCO (MarketWatch) -- Intel Corp. on Thursday reported a 90% drop in fourth-quarter net profit as the chip giant navigated what Chief Executive Paul Otellini said was a "dramatic" decline in sales.
Intel shares were up about 3% after hours.
Intel reported fourth-quarter net income of $234 million, or 4 cents a share, compared with a net profit of $2.27 billion, or 38 cents a share, for the year-earlier period. Revenue was $8.2 billion, down 23% from $10.7 billion last year.
Analysts had expected the Santa Clara, Calif.-based chip maker to report earnings of 4 cents a share on revenue of $8.2 billion, according to a consensus survey by Thomson Reuters.
"Our fourth quarter results reflect the difficult economic climate," Otellini said in a call with analysts. "Putting our results into perspective, this is only the second time in 20 years that our fourth quarter revenues were below the third quarter. The last being the year 2000, where revenues declined less than 1%. The pace of the revenue decline in the quarter was dramatic. And resulted from reduced demand and inventory contraction across the supply chain."
Amid the cloudiness in the economy, the company also said it was issuing "less quantitative guidance than in previous quarters."
"Due to economic uncertainty and limited visibility, Intel is not providing a revenue outlook at this time," the company said in a prepared statement. "For internal purposes, the company is currently planning for revenue in the vicinity of $7 billion."
Analysts currently expect the company to report sales of $7.28 billion, according to a consensus survey by Thomson Reuters.
"The economy and the industry are in the process of resetting to a new baseline from which growth will resume," Otellini said in a statement. "While the environment is uncertain, our fundamental business strategies are more focused than ever."
Citigroup analyst Glen Yeung said Intel's sales outlook "speaks to the company's lack of visibility."
"If proven to be accurate, it is inline with our preview and does suggest a deceleration of quarter-on-quarter declines," he said in a research note.
"As are other companies, Intel is doing a commendable job managing expenses," Yeung added. "Economic conditions continue to pummel semiconductor fundamentals -- this is well understood."
Analyst John Dryden of Charter Equity Research said the company's March sales outlook is "weaker than I expected, especially for gross margin, but not believe the most bearish expectations on the street."
"With the poor outlook and weaker visibility I thought we might see some expense cuts which is not the case and might disappoint shareholders," Dryden added.
Otellini reaffirmed the company's plan to introduce a 32 nanometer production technology in the second half of the year, saying, "We've always believed that the best way to successfully emerge from recessions is with tomorrow's products, not by standing still with today's." End of Story
Benjamin Pimentel is a MarketWatch reporter based in San Francisco.