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Intel lowers expectations as downturn slams chip makers
By Jordan Robertson |
January 9, 2009, Friday
|
Print Edition
Print Edition
EVEN after sharply reducing its outlook for the fourth quarter, Intel Corp said it will miss its revenue projection by about US$500 million, a sign that personal-computer makers and buyers are being more tightfisted than it seemed only two months ago.
Intel shares closed down 6 percent on Wednesday, when the statement was issued.
Santa Clara, California-based Intel, the world's largest chip maker, reported that revenue was US$8.2 billion for the last three months of 2008, a 23 percent decline from the year-ago period. Analysts surveyed by Thomson Reuters said they were expecting US$8.7 billion, which was at the low end of the range Intel provided in November of US$8.7 billion to US$9.3 billion.
Intel's profits also are being hit. The company expects its gross profit margin to be at the bottom of its previous guidance, which predicted 53 to 57 percent 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 in looking at chip makers, since their manufacturing expenses are huge.
Intel is scheduled to provide more detail when it releases full fourth-quarter earnings on Thursday.
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 to figure out how badly they're being hurt.
Intel blamed the latest revision on weaker-than-expected demand, piling up in a chain reaction.
Businesses are putting off upgrading to new computers until the economy and their finances improve. And consumers, singed by layoffs and falling home prices and stock portfolios, have scaled back their spending as well.
In turn that has prompted PC makers to try to save money by burning through their existing inventories of chips instead of buying lots of new ones.
These trends have slammed chip makers since the downturn intensified in September - and now appears to be worsening.
The news came as little surprise to industry analysts, who have been warning for months that PC suppliers like 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 with Stifel, Nicolaus & Co. "Right now the economy is causing everybody up and down the manufacturing channel to live hand to mouth."
Intel's primary competitor in the market for microprocessors, which are the brains of personal computers, has also slashed its forecasts. Sunnyvale, California-based Advanced Micro Devices Inc warned last month that its fourth-quarter sales would drop 25 percent from the previous quarter. That implies a drop of 33 percent from the previous year.
Intel shares dropped 69 cents, or 4.5 percent, to US$14.68 on Wednesday. AMD shares fell 11 cents, or 4.3 percent, to US$2.66.
Intel shares closed down 6 percent on Wednesday, when the statement was issued.
Santa Clara, California-based Intel, the world's largest chip maker, reported that revenue was US$8.2 billion for the last three months of 2008, a 23 percent decline from the year-ago period. Analysts surveyed by Thomson Reuters said they were expecting US$8.7 billion, which was at the low end of the range Intel provided in November of US$8.7 billion to US$9.3 billion.
Intel's profits also are being hit. The company expects its gross profit margin to be at the bottom of its previous guidance, which predicted 53 to 57 percent 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 in looking at chip makers, since their manufacturing expenses are huge.
Intel is scheduled to provide more detail when it releases full fourth-quarter earnings on Thursday.
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 to figure out how badly they're being hurt.
Intel blamed the latest revision on weaker-than-expected demand, piling up in a chain reaction.
Businesses are putting off upgrading to new computers until the economy and their finances improve. And consumers, singed by layoffs and falling home prices and stock portfolios, have scaled back their spending as well.
In turn that has prompted PC makers to try to save money by burning through their existing inventories of chips instead of buying lots of new ones.
These trends have slammed chip makers since the downturn intensified in September - and now appears to be worsening.
The news came as little surprise to industry analysts, who have been warning for months that PC suppliers like 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 with Stifel, Nicolaus & Co. "Right now the economy is causing everybody up and down the manufacturing channel to live hand to mouth."
Intel's primary competitor in the market for microprocessors, which are the brains of personal computers, has also slashed its forecasts. Sunnyvale, California-based Advanced Micro Devices Inc warned last month that its fourth-quarter sales would drop 25 percent from the previous quarter. That implies a drop of 33 percent from the previous year.
Intel shares dropped 69 cents, or 4.5 percent, to US$14.68 on Wednesday. AMD shares fell 11 cents, or 4.3 percent, to US$2.66.
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