Intel claims limited visibility, offers no Q1 forecast

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Intel claims limited visibility, offers no Q1 forecast
Fourth quarter profit, sales tumble as economy softens

Bolaji Ojo
EE Times
(01/15/2009 5:02 PM EST)

Intel Corp. said it cannot "predict product demand" for the first quarter and has therefore declined to offer its typical revenue and profit forecast but instead will work off a temporary number that calls for a 15 percent sequential sales decline on top of the 19 percent drop from the third quarter of 2008.
The world's biggest semiconductor company is considered the bellwether for the rest of the chip market and its lackluster fourth quarter performance coupled with its unwillingness to offer guidance for the ongoing quarter indicates the industry might be headed for one of its worst recessions in decades.

Intel said fourth quarter 2008 net income fell to $234 million, or 4 cents per share, hit hard by a $1.2 billion loss on equity investments related to its interest in Clearwire Corp.

In the year-ago comparable quarter Intel posted net profit of $2.3 billion, or 38 cents per share. Revenue in the three months ended Dec. 27, 2008 sank to $8.2 billion, down 23 percent as previously predicted, from $10.7 billion in the comparable 2007 quarter.

"The economy and the industry are in the process of resetting to a new baseline from which growth will resume," said Paul Otellini, Intel's president and CEO in a statement announcing the results. "While the environment is uncertain, our fundamental business strategies are more focused than ever."

Intel will need all the weapons in its arsenal to pull through the coming recession. It's not typical, even in the most distressing market environment, for Intel to decline to offer investors and analysts a clear idea of how it expects to perform in a particular reporting period.

By refusing to provide even a wide sales forecast range this time, Intel is basically indicating demand has stalled and visibility into OEM component requirements has fogged up completely.

"Due to economic uncertainty and limited visibility, Intel is not providing a revenue outlook at this time," the company said. "For internal purposes, the company is currently planning for revenue in the vicinity of $7 billion."

What's clear is that Intel's capacity utilization has fallen very sharply and won't recover immediately. The company said first quarter gross profit margin "is expected to decline to the low 40s primarily due to higher underutilization charges and 32 nanometer start-up costs."

Intel's fourth quarter 2008 gross profit margin fell as expected to 53.1 percent, from 58.1 percent in the 2007 comparable quarter. The company whittled down R&D as well as other operating costs during the recently ended quarter continuing a trend analysts expect will accelerate in the current difficult environment.

For 2009, Intel said it expects R&D and marketing, general and administrative charges will be between $10.4 billion and $10.6 billion. Capital spending is "expected to be flat to slightly down from 2008," Intel said.