Intel's profits trail forecasts, stocks down

Intel's profits trail forecasts, stocks down

	Published : Thu, 19 Jan 2006 02:05 By : Cedric Benson Print this Story

SAN FRANCISCO: Chipmaker Intel Corporation posted its fourth quarter results Tuesday well below expectations as the company faced weak demand for processors for desktops.

The company's net profit was $2.5 billion, or 40 cents per share, up from $2.1 billion, or 33 cents per share, a year earlier. Revenue went up 6 per cent to $10.2 billion from $9.6 billion, but short by $200 million of its own forecast, issued less than a month ago. Analysts had predicted a profit of 43 cents per share on revenue of $10.56 billion.

The company, whose microprocessors power almost 90 per cent of the world's PCs, admitted it had lost some share to rival AMD.

It predicted revenue of between $9.1 billion and $9.7 billion for the first quarter, which is below Wall Street estimate of over $10 billion.

Intel's chief executive Paul Otellini told an analysts' conference call that the company is starting out "in a bit more of a hole for 2006 than we first had thought .... We hope to capitalize on any revenue opportunity and a lot will depend on the product."

Otellini said he hoped to regain market share as the company ramped up its dual-core processor line this year.

The company said gross margins in the fourth quarter were 61.8 per cent, compared with 59.7 per cent for the third quarter and below the company's forecast of 63 per cent.

Intel hopes to have increased capital spending in 2006 -- a possible increase of 19 per cent, to about $6.9 billion, as the company plans to introduce new manufacturing technology in some of the plants. Construction is expected to begin for two new manufacturing plants -- one in Arizona and the other in Israel -- in 2006, with operations set to commence in 2008. The company used 65-nanometer technology for its highend chips.

Chief financial officer Andy D. Bryant said the sluggish sales were caused by a shortage of chipsets, components that work with microprocessors. Some of the chipsets came from outside suppliers. "2005 was a great year punctuated by a difficult December," he said

He said Intel had probably lost about a percentage point of market share in the fourth quarter.

Intel shares were down 9.5 per cent in extended trading to $23.10, while at the Nasdaq, it closed at $25.52. The stock had risen about 13 per cent over the year giving the company a value at about 16 times its estimated 2006 profit, compared with about 36 times for AMD.