Intel cagey on recovery
Despite better than expected Q4
Intel Corp yesterday further fueled expectations that the PC industry may be doing better than expected, when it reported fourth quarter results that hit the high end of its earlier guidance -Joe Fay writes
However, the company resisted analysts' calls to stake out its expectations for the year ahead, refusing to forecast more than a seasonal pattern of sales for the current quarter and a recovery some time later this year.
The company turned in sales of $6.98bn for the quarter ending December 31, down 19.8% on the year. In December, the company raised its revenue guidance to $6.2bn to $6.8bn. Operating income was down 60.9 per cent to $1bn, while net income was off 77 per cent to $504m. On a proforma basis, excluding acquisition costs, net income was $998m, compared to the previous year's $2.6m. This generated earnings per share of $0.15. Wall Street had expected earnings of $0.11 per share.
The lack of earnings warnings from major PC vendors since the close of 2001 has prompted speculation that sales in the fourth quarter were better than had been expected and that a PC recovery may be in the offing.
Andy Bryant, Intel's CFO, said the Santa Clara, California-based company was "pleased to report 2001 is over". Nevertheless, he was cautious about building hopes up too far for the year ahead.
He predicted that the company would turn over between $6.4bn and $7bn in the first quarter, with gross margin at 50per cent plus or minus a couple of points, compared to 51 per cent in the first quarter. The company expects the first quarter performance to be "seasonal", bar any unexpected developments in the economy at large.
However, the company was more cryptic on its long-term expectations. Bryant refused to go into detail on the likely performance of either the company or the economy for the rest of the year. However he did say the company was going into the first quarter with a strong order book and said the company was "thinking in terms of a recovery some time after the first quarter".
At the same time, the company is continuing to scale up its infrastructure. Paul Otellini, executive vice president and general manager of the Intel Architecture Group, said it was "putting in capacity plans on the basis it can meet demand in a recovery."
Despite the firm's emphasis on new capacity, which will see an accelerated shift to 0.13 micron processes this year, to be followed by a large scale move to 300mm wafer production next year, the company gave chip equipment vendors little in the way of comfort. Capital expenditure this year is expected to be $5.5bn, compared to $7.3bn last year. Nevertheless, 85% of this amount will go towards investing in manufacturing.
Once again, it was Intel's core processor business, the Intel Architecture Group, that underpinned the company's performance in the fourth quarter, turning in $5.8bn of sales, and $1.8bn of operating profit, making it the only division not to turn in a loss. The Intel Communications Group turned in a $129m loss on sales of $590m, while the Wireless Communications and Computing Group lost $20m on sales of $518m.
For the full year, sales were $26.5bn, down 21.3%, with net income of $1.3bn, down 87.7%. On a proforma basis net income was $3.6bn, down from $12.1bn the previous year.
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