Intel profit sinks 90%
The chipmaker says weak demand and inventory contraction hurt fourth-quarter earnings results.
NEW YORK (CNNMoney.com) -- Intel Corp. reported a 90% drop in fourth-quarter earnings Thursday that were in line with Wall Street's reduced expectations, as demand for semiconductors remains weak.
The Santa Clara, Calif.-based company reported net income of $234 million, or 4 cents per share, for the three months ended Dec. 27. That's down from earnings of $2.27 billion, or 38 cents per share, in the year-earlier period.
Sales in the quarter fell 23% to $8.2 billion from $10.7 billion a year ago.
The results fell in line with Wall Street's predictions. Analysts had forecast a profit of 4 cents per share on sales of $8.2 billion, according to consensus estimates gathered by Briefing.com.
Intel said it is not providing a revenue outlook at this time, citing economic uncertainty and limited visibility. For internal purposes, however, the company said it is currently planning for first-quarter revenue "in the vicinity of $7 billion."
Wall Street is expecting Intel to report first-quarter revenues of $7.3 billion, according to a consensus of analysts surveyed by Briefing.com.
Intel's results were widely expected to be bad. The company had lowered its sales and earnings forecasts twice during the quarter, citing weak demand and inventory reductions in the PC-supply chain.
"The slowing of the worldwide economy resulted in a weak fourth quarter," said Stacy Smith, Intel's chief financial officer in a conference call with analysts and investors. It was the first time in 20 years that fourth-quarter earnings were lower than the third quarter, the company said.
Still, Intel maintains that it is well-positioned for growth when the economy recovers.
"We remain optimistic about where our strategy and execution can take us," said Intel Chief Executive Paul Otellini.
While weak demand and inventory levels are still a concern, the company hinted that its profit margins could return to a "healthy range" by second half of the year.
To that end, Intel said capital spending in 2009 is expected to be flat to slightly down versus last year despite the challenges facing the company. Capital spending plans, however, will "continue to modulate based on demand," Smith said.
Intel, the world's largest chipmaker, is widely viewed as a proxy for the health of the overall PC industry, since its products are a key component for most computer manufacturers.
"The PC industry is having a hard time right now," said Betsy Van Hees, an analyst who follows Intel for Caris & Company. "We're in a global recession and we don't have a lot of demand-drivers to pull us out."