As expected, Intel’s fourth quarter earnings call was a reflection of the global economic downturn. The company has announced its fourth quarter revenues were $8.2 billion, in line with revised forecasts, but down 19 percent from the third quarter and 23 percent from the fourth quarter of 2007. This is only the second time in 20 years that a third to fourth quarter sales drop has occurred. The last time was in 2000 during the heart of the dot-com crash.
Intel’s net income from revenues was $234 million, 4 cents per share, factoring in the company’s $950 million writedown due to its investment in Clearwire’s WiMAX merger. Operating income was $1.5 billion, a 50 percent decrease year-over-year.
The company’s poor results should come as a surprise to no one. As the economy turned, demand has dried up leaving Intel with an inventory glut. Though the company cut back production in December and will get some added assistance from the Chinese New Year, Intel chief executive and president Paul Otellini didn’t provide a revenue outlook for the first quarter of 2009 citing economic uncertainty. He did say for internal planning purposes, Intel was quoting $7 billion, slightly less than Wall Street’s expected $7.2 billion. Also as a result of the production slowdown, Intel’s gross margins will drop from 53 percent in the fourth quarter to the low 40s in the first.
There are a few bright spots in Intel’s outlook for 2009. Not only will the company slice $700 million in costs in 2009, it’ll continue investing in research and development. The company expects to spend $5.4 billion in R&D in 2009, roughly the same as its spending in 2008. It’ll also continue to prepare its 32nm manufacturing process which will improve efficiency and lower costs heading into 2010.
Intel’s Atom processor and related chipsets brought in $300 million in revenues in the fourth quarter, up 50 percent, and Otellini stated the company wasn’t seeing cannibalization of its more expensive processors. Its Atom processors are often used in low-cost netbooks which are extremely popular these days.
Intel’s share price closed at $13.29, up 21 cents for the day, and is currently sitting at $13.85 in after hours trading. It’s still a far cry though from the company’s 52-week high of $25.29.