Intel 4Q results down, but better than expected

Intel, the US chip giant and arch WiMAX champion, has posted – as widely anticipated – a sharp decline in all its key financial indicators for 4Q 2008.

The good news is that it expects 1Q 2009 to be the “trough” and to emerge in the second half with improving gross margin figures. As a consequence, Intel, a bellwether of technology stocks, managed to reassure the financial markets to a certain extent. Its share price rose by nearly five percent at its peak on Thursday’s trading on Nasdaq before closing at $13.19 per share, a 1.16 percent rise on the day.

Given the slackening of demand for microprocessors and chipset units from its PC manufacturer customers in the economic downturn, Intel’s 4Q 2008 revenue slumped by 19 percent, quarter-on-quarter, to $8.2bn. Over the course of the year, Intel’s revenue fell by two percent to $37.6bn.

Intel’s gross margin for 4Q 2008 was 53 percent, six points down compared to the previous quarter. The company attributes the margin decline primarily to “higher factory underutilisation charges and higher inventory write-offs”.

Intel anticipates that margins may increase in 2H 2009 when customers work through excess supplies. In the Intel conference call, CFO Stacy Smith said that Intel’s gross margins would be in the low 40s during 1Q 2009 and then rise subsequently, suggesting a path to recovery was in sight.

“The economy and the industry are in the process of resetting to a new baseline from which growth will resume,” said Paul Otellini, Intel president and CEO, in a statement.

Intel did not, however, provide an official sales forecast for the next quarter – as it usually does – due to the uncertain economic climate. Instead, Intel says it’s planning for revenue of around $7bn for 1Q 2009, but this figure was for ‘internal purposes only’.

Intel’s 4Q 2008 net income dived 88 percent, quarter-on-quarter, to $234m. This includes, however, a $950m non-cash write-down on the value of its Clearwire investment, which reflects the decline in share price value of the mobile WiMAX operator in the US.