Intel Remains Profitable but Pressured

By Kathleen A. Martin  |  Print this article Print

Earnings from the top chipmaker show the economic downturn is having a ripple effect throughout the technology community.

Intel is the last technology company to announce disappointing fourth quarter and full-year earnings; the chipmaker’s revenue dropped 19 percent from Q3 and 23 percent from the same time last year.

Intel, the world’s top producer of microprocessors and memory components, reported fourth quarter revenues of $8.2 billion and a profit of $234 million, down 9 percent over the same period in 2007.

While Intel’s full-year income of $37.6 billion was only off 2 percent compared to 2007, its net income of $5.3 billion was down 24 percent year over year.

The silver lining in Intel’s dark cloud was the news that chipset and wireless connectivity products set new unit and revenue records. Yet the total microprocessor average selling price was flat. 

In its earnings statement, Intel said it "removed more than $800 million of cost from the company in 2008 under the structure and efficiency program launched in 2006. Cumulative spending reductions under the program to date exceeded $3 billion."

Part of these savings can be tied back to employee layoffs which began in 2006.

While Intel anticipates continued challenges in a slow economy, its outlook remains optimistic. However, message boards are littered with reports of Intel carrying a backload of inventory and "channel stuffing," or selling product to partners to carry on their inventory sold or unsold.

The earnings were far from a surprise for most analyst and investors as market research firm IDC reported that worldwide PC shipments dropped 0.4 percent in the fourth quarter from a year earlier, the first year-to-year drop in six years.


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