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Intel misses guidance, raises 2006 capex

Posted: 23 Jan 2006     Print Version  Bookmark and Share

Keywords:Intel  earnings  Spencer Chin 

Intel Corp. has posted net earnings of Rs.11,275 crores ($2.5 billion), or Rs.18.04 (40 cents) per share on sales of Rs.46,002 crores ($10.2 billion) in the fourth quarter, with revenue falling below the company's updated guidance for revenue of Rs.46,904 crores ($10.4 billion) to Rs.47,806 crores ($10.6 billion).

In December, Intel narrowed its fourth-quarter guidance from the original range of Rs.46,002 crores ($10.2 billion) to Rs.48,708 crores ($10.8 billion). The move raised the ire of analysts, who expected Intel to perform better.

In total, Intel's fourth-quarter sales were up 2 per cent sequentially and up 6 per cent from a year ago. Profits were up 23 per cent sequentially and 16 per cent from a year ago.

Intel attributed the lower revenue to lower-than-expected shipments and falling average selling prices for processors sold to the desktop PC market. During a conference call with analysts, Intel CEO Paul Otellini added that an inventory build up, along with continuing chip set shortages, contributing to the less-than-stellar results.

A telltale sign of Intel's fourth-quarter woes were gross margins, which at 61.8 per cent fell below the company's mid-quarter guidance of 63 per cent. Intel cited a product mix shift to non-microprocessor products as the reason. In recent months, Intel has been facing heightened competition from AMD Inc., with its chief rival edging the company in desktop processors for the retail market.

Surprisingly, Europe was the biggest market for Intel, followed by Japan, Asia-Pacific and then the Americas. The Americas market was in negative growth territory for the quarter.

Intel's digital enterprise group had flat sales, but operating profits were up for the desktop processor unit. The mobility unit continued to shine, as sales and operating profit were up. Its flash-memory unit narrowed its losses to Rs.54.12 ($12 million) in the quarter as sales improved.

For 2005, Intel earned Rs.26,158 crores ($8.7 billion), or Rs.63.14 ($1.40) per share, on sales of Rs.1,74,988 crores ($38.8 billion). Earnings rose 19 per cent and sales climbed 13.5 per cent from 2004, when Intel earned Rs.33,825 crores ($7.5 billion), or Rs.52.31 ($1.16) per share on sales of Rs.1,54,242 crores ($34.2 billion).

Intel, which is ramping up its 65nm process technology, said it planned to invest Rs.31,119 crores ($6.9 billion) in capital expenditures in 2006. That's up 19 per cent from Rs.26,158 crores ($5.8 billion) in 2005, according to Intel chief financial officer Andy Bryant, during the conference call.

But other aspects of Intel's 2006 forecast were troubling. The company projects sales to rise by only 6 to 9 per cent over 2005, and expects gross margins of 57 per cent. For the first quarter, Intel forecast revenue of Rs.41,041 crores ($9.1 billion) to Rs.43,747 crores ($9.7 billion), sequentially lower, with gross margins of 59 per cent.

Bryant said lingering inventories at OEM customers would reduce first-quarter revenue. Otellini added the company would no longer issue mid-term forecasts. On the technology front, Otellini said that Intel would continue to ramp up its dual-core processor lineup, and launch an architecture for mobile products during the second half of 2006.

- Spencer Chin
EE Times

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