<TABLE cellSpacing=0 cellPadding=0 width=452 border=0><TBODY><TR><TD vAlign=top width=452 colSpan=2>Published April 16, 2009
</TD></TR><TR><TD vAlign=top width=452 colSpan=2>Intel says PC industry bottomed out in Q1
Its Q1 earnings fall 55% on 26% slide in sales; company expects flat revenue in Q2
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(SAN FRANCISCO) In another sign that the worst of the economic downturn might have passed, Intel said on Tuesday that the personal computer industry had bottomed out in the first quarter of the year.
Paul Otellini, Intel's chief executive, said, 'The worst is now behind us.' The company, which makes computer chips, reported that net income in the first quarter fell 55 per cent from a year ago. It forecast modest growth in the coming months, but industry analysts said that a rebound would be anything but sharp and fast.
'The best word for it is 'stabilisation',' said Glen Yeung, an analyst with Citi. But he was cautious about how much good news that represented. 'The reason they have found the bottom is because it's been so bad that it's hard to imagine it could have gotten worse.'
Mr Otellini said in the company's earnings announcement, 'We're seeing signs that a bottom in the PC segment has been reached.'
He also said that consumer demand remained relatively stronger than corporate demand and that demand in the United States and China appeared to be recovering more quickly than in Europe, Japan and emerging markets around the world.
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</TD></TR></TBODY></TABLE>Intel reported that its net income fell to US$647 million, or 11 cents a share, from US$1.44 billion, or 25 cents a share, in the year-ago quarter. The company reported sales of US$7.1 billion, down 26 per cent from US$9.67 billion, reported a year ago. Intel reported net income a share, excluding one-time charges, of 8 cents, beating the consensus Wall Street estimate of 2 cents a share.
Intel said it was not confident enough in the state of the economy to provide a revenue estimate for its second quarter. But it said that 'for internal purposes' it was planning for flat revenue in the second quarter.
Wall Street analysts had hoped for a rosier outlook. After its earnings announcement, Intel's shares fell in after-hours trading on Tuesday by 5.4 per cent, to US$15.14. It had closed Tuesday at US$16.01, up 3 cents. Intel's stock has had a mini-rally over the last month, rising from about US$13.
One area of the computer business that has been relatively strong has been the sale of low-cost, Internet-centric machines the industry calls mini notebooks or netbooks. But Intel had a sharp drop in the quarter for sales of its Atom processor, a chip that powers some of these devices. The first-quarter sales of US$219 million were down 27 per cent from the fourth quarter of last year.
Intel attributed the drop to computer makers' using their excess inventory of chips. The company expects demand to return as those inventories grow leaner.
Intel's gross profit margins of 45.6 per cent were several percentage points above what analysts had expected, but a number that was decidedly low by its historical standards.
In the previous quarter, gross margins were 53 per cent; they were 59 per cent in the third quarter.
Gross margins have not been this low since the third quarter of 2001, when they hit 46 per cent, Edwin Mok, an analyst with Needham & Co, said. Intel forecast that margins would remain in the mid-40s in the current quarter. 'This might be a little disappointing for the street,' Mr Mok said.
Mr Yeung drew a distinction between the tepid reaction of the stock, which in Intel's case tends to trade on projections of its gross margins, and the positive outlook that the computer market appeared to have hit a bottom.
Citi projects, for instance, that the number of notebooks built in the second quarter will increase 10 to 15 per cent from the first quarter. Netbook shipments are expected to grow 15 to 20 per cent in the current quarter, and shipments of desktops are expected to be flat or down 5 per cent.
But Mr Yeung said the market had a long way to go. He said that demand for computers was as far from average historical demand as it had been in more than a decade.
'Fundamentally, business has been getting better since the beginning of February,' he said. But 'it's not like it's going gangbusters.' - AP
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</TD></TR><TR><TD vAlign=top width=452 colSpan=2>Intel says PC industry bottomed out in Q1
Its Q1 earnings fall 55% on 26% slide in sales; company expects flat revenue in Q2
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</TD><TD>Feedback</TD></TR></TBODY></TABLE>(SAN FRANCISCO) In another sign that the worst of the economic downturn might have passed, Intel said on Tuesday that the personal computer industry had bottomed out in the first quarter of the year.
Paul Otellini, Intel's chief executive, said, 'The worst is now behind us.' The company, which makes computer chips, reported that net income in the first quarter fell 55 per cent from a year ago. It forecast modest growth in the coming months, but industry analysts said that a rebound would be anything but sharp and fast.
'The best word for it is 'stabilisation',' said Glen Yeung, an analyst with Citi. But he was cautious about how much good news that represented. 'The reason they have found the bottom is because it's been so bad that it's hard to imagine it could have gotten worse.'
Mr Otellini said in the company's earnings announcement, 'We're seeing signs that a bottom in the PC segment has been reached.'
He also said that consumer demand remained relatively stronger than corporate demand and that demand in the United States and China appeared to be recovering more quickly than in Europe, Japan and emerging markets around the world.
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Intel said it was not confident enough in the state of the economy to provide a revenue estimate for its second quarter. But it said that 'for internal purposes' it was planning for flat revenue in the second quarter.
Wall Street analysts had hoped for a rosier outlook. After its earnings announcement, Intel's shares fell in after-hours trading on Tuesday by 5.4 per cent, to US$15.14. It had closed Tuesday at US$16.01, up 3 cents. Intel's stock has had a mini-rally over the last month, rising from about US$13.
One area of the computer business that has been relatively strong has been the sale of low-cost, Internet-centric machines the industry calls mini notebooks or netbooks. But Intel had a sharp drop in the quarter for sales of its Atom processor, a chip that powers some of these devices. The first-quarter sales of US$219 million were down 27 per cent from the fourth quarter of last year.
Intel attributed the drop to computer makers' using their excess inventory of chips. The company expects demand to return as those inventories grow leaner.
Intel's gross profit margins of 45.6 per cent were several percentage points above what analysts had expected, but a number that was decidedly low by its historical standards.
In the previous quarter, gross margins were 53 per cent; they were 59 per cent in the third quarter.
Gross margins have not been this low since the third quarter of 2001, when they hit 46 per cent, Edwin Mok, an analyst with Needham & Co, said. Intel forecast that margins would remain in the mid-40s in the current quarter. 'This might be a little disappointing for the street,' Mr Mok said.
Mr Yeung drew a distinction between the tepid reaction of the stock, which in Intel's case tends to trade on projections of its gross margins, and the positive outlook that the computer market appeared to have hit a bottom.
Citi projects, for instance, that the number of notebooks built in the second quarter will increase 10 to 15 per cent from the first quarter. Netbook shipments are expected to grow 15 to 20 per cent in the current quarter, and shipments of desktops are expected to be flat or down 5 per cent.
But Mr Yeung said the market had a long way to go. He said that demand for computers was as far from average historical demand as it had been in more than a decade.
'Fundamentally, business has been getting better since the beginning of February,' he said. But 'it's not like it's going gangbusters.' - AP
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