Intel Corp.’s Q4 profit plunged 90% but still met Wall Street’s subdued expectations Thursday, as the chip maker was hurt by wheezing PC sales that have crimped demand for microprocessors.
Sales slumped 23%, in line with Intel’s previous guidance. That was good enough to send Intel’s shares up 3.8% in after-hours trading. Net income was $234 million, or 4 cents per share, compared with $2.3 billion, or 38 cents per share, in the year-ago period.
The Santa Clara, California-based company’s profits are being squeezed by a freeze in information-technology spending and a shift toward low-margin processors for a class of little laptops known as “netbooks.” A big reason for the severity of the fourth-quarter drop, though, was a $1 billion writedown of the value of Intel’s investment in Internet provider Clearwire Corp.
Clearwire specializes in a new type of wireless broadband technology called WiMax that Intel is building into its chips, and has stumbled on fears the credit crunch will derail its ambitious network buildout plans.
Intel’s sales were $8.2 billion, a 23% shortfall from last year. Intel blunted the shock of the big declines by lowering its guidance twice, including an announcement just last week. For all of 2008, Intel earned $5.3 billion, 24% lower than a year ago, on sales of $37.6 billion, a 2% decline.
PC demand is sinking fast, which takes its toll on Intel because Intel owns 80% of the market for microprocessors, the brains of personal computers. Market research firms IDC and Gartner Inc. reported this week that PC sales growth in the Q4 was the worst it’s been in six years, with the slump expected to drag out until possibly 2010.
One area where Intel shines is controlling its manufacturing costs, where it enjoys a big advantage over smaller rival Advanced Micro Devices Inc. Intel’s quicker transition than AMD to 45-nanometer manufacturing technology, which shrinks the size of the chips’ circuitry, has made each chip cheaper to produce. That has helped cushion the blow of falling sales.
AMD — which has lost billions of dollars over the past two years, recently changed CEOs, and is spinning off its factories to save money — warned that its fourth-quarter sales will likely come in 33% lower than last year. AMD reports quarterly results Jan. 22.
During the regular trading session before the earnings report, Intel stock rose 21 cents, 1.6%, to close at $13.29. The shares hit $13.80 in after-hours trading. (The Economic Times)