MARKETS
Intel's profits slide
17-01-2007
by Ciara O'Brien
There was bad news for Intel this week as profits fell 39 percent in the fourth quarter of 2006, while operating income slumped 55 percent.
Despite turning over USD9.7 billion and earning USD1.5 billion in operating income during the quarter, Intel still failed to meet the standard of a year earlier. In the fourth quarter of 2005, Intel earned 5 percent more in revenue at USD10.2 billion, while profits reached USD2.5 billion -- 39 percent more than the latest fourth quarter 2006 figures.
The final quarter results also included a gain from the sale of assets to Marvell Technology Group, but this was partially offset by impairments, including one incurred by the decision sell the company's Fab 23 facility in Colorado.
The figures made grim reading, showing the extent to which the company's fortunes have changed in the past year. The decline has been blamed on its battle with rival chipmaker AMD, and charges arising from Intel's global restructuring, which cost the chip manufacturer USD457 million.
Although Intel shipped a record number of microprocessor units, chipset unit sales were flat, while motherboard units suffered a slump. Flash memory, on the other hand, performed well.
However -- on the surface at least -- Intel bigwigs remained upbeat. "Intel's product and technology leadership yielded a strong fourth quarter with higher selling prices and record unit shipments in the fastest growing segments of the market," said Intel president and chief executive Paul Otellini.
But analysts have not bought the company line. "Despite citing higher selling prices during the quarter, Intel's gross margin missed forecasts coming in below 50 percent for the second consecutive quarter at 49.6 percent in 4Q06. The company's gross margin indicates that [it] continues to face intense pricing competition from rival AMD," said analysts at TBR.
The yearly figures made equally depressing reading. Although the chipmaker achieved revenue of USD35.4 billion during 2006, this was 9 percent less than the USD38.8 billion earned in 2005. Operating income fell 53 percent to USD5.7 billion, while net income fell 42 percent to USD5 billion, and earnings per share slumped39 percent to USD0.86.
However, there could be brighter days on the horizon, and analysts at TBD expect to see improved profitability for the second half of 2007 when restructuring costs should no longer affect the balance sheet.
Intel, meanwhile, is predicting revenue for the first quarter of 2007 to be between USD8.7 billion and USD9.3 billion.
In Ireland, Intel currently employs more than 5,500 people at its premises in Leixlip, Co Kildare, with a further 150 employed at Intel Shannon, Co. Clare.
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