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Intel Profit Doubles, Sees Weaker 1st-Qtr
Wednesday January 14, 5:29 pm ET
By Daniel Sorid
SAN FRANCISCO (Reuters) - Intel Corp., the world's largest producer of microchips, reported a 22 percent rise in quarterly revenue on Wednesday due to strength in its processor business, and said profit more than doubled despite a $611 million charge for a communications-related acquisition.
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The Santa Clara, California-based chip maker, however, said first-quarter revenue would decline from the fourth quarter, and its shares dropped by 2 percent in after-hours trading on Instinet.
Intel forecast first-quarter revenue in the range of $7.9 billion to $8.5 billion, within the range of analyst estimates. The company also said it expected its gross margin to reach 60 percent, plus or minus a few points.
"I think it's the guidance," Stephen Massocca, president of San Francisco-based investment bank Pacific Growth Equities, said of the after-hours stock drop. "I think it's probably a little bit more conservative than people expected."
In the fourth quarter ended Dec. 27, Intel (NasdaqNM:INTC - News) reported a profit of $2.17 billion, or 33 cents a share, on revenue of $8.74 billion, which marginally topped their previous record set in the third quarter of 2000. In the prior-year period, the Santa Clara, California-based company reported earnings of 16 cents a share on net revenue of $7.16 billion.
Intel's earnings, which also included a 9 cent per share tax benefit from divestitures, topped Wall Street analyst expectations of 23 cents to 28 cents a share. Intel said 6 cents of that tax benefit had not been anticipated. Its revenue came just above a target set by Intel last month of $8.5 billion to $8.7 billion.
The company, which is the largest spender on machinery used to produce microchips, set a capital spending budget of $3.6 billion to $4.0 billion this year, compared to $3.7 billion last year. Analysts said Intel may spend on new equipment at a slower rate than the rest of the industry, and shares of semiconductor equipment companies dipped in after-hours trade.
Intel stock, which more than doubled last year, fell 20 cents, or less than 1 percent, to $33.39 in 4:00 p.m. trading on the Nasdaq. The shares fell to $32.80 in after hours trade on Instinet.
"On the surface, the numbers look OK," said Todd Clark, head of listed trading at Wells Fargo Securities. "It's not unusual to have a sell-to-news reaction."
INTEL CFO: SIGNS OF CORPORATE TECH SPENDING
Following the earnings report, Intel Chief Financial Officer Andy Bryant told Reuters in an interview that the company has seen early indicators of a return to stronger spending on computers and other technology by corporations.
"What we saw in the fourth quarter was surprising strength, both in North America and Western European geographies, which we assume is an early indicator of an increase in I.T. spending," Bryant said.
Bryant also said sales in developing countries remained healthy, and that strength was expanding into more mature markets where sales had lagged.
"It was worldwide," Bryant said. "We've been seeing strength through the year in emerging markets, in China, Russia and India. What we saw in the fourth quarter was strength not only in those emerging markets but in the mature markets, North America, Western Europe, actually buying product at a faster rate than we expected."
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