RealTime IT News

With Sales Slumping, Intel Hunkers Down

Intel on Thursday reported a severe decline in gross income and net revenue due to a massive slowdown in sales worldwide, along with a major hit due to a reduction in the carrying value of one of its investments.

Despite the severe worldwide scenario, the world's largest chip maker plans to continuing spending on advancing its fabrication plants and designing new products.

"We have always believed the best way to successfully emerge from recession is with tomorrow's products, not by standing still," CEO Paul Otellini told a conference call of financial analysts. "We won't do it with yesterday's products."

Intel (NASDAQ: INTC) reported fourth quarter income of $234 million, or 4 cents a share, a 90 percent drop from the $2.3 billion, or 38 cents a share it earned in the fourth quarter of 2007. Sales plunged 23 percent over the prior quarter to $8.2. billion, a quarter when Intel traditionally does its best business.

Intel said the quarter's results were impacted due to a $1 billion reduction in the carrying value of the company's investments in Clearwire. Clearwire is a wireless broadband service that has partnered with Intel to build WiMAX services around the country.

Otellini said this was only the second time in 20 years that the fourth quarter was below third quarter sales, and that was in 2000, when sales dipped one percent. The decline in customers buying supplies was such that Intel had to reduce work at its factories, causing it to take a charge of $250 million for underutilization.

He said reduced demand and inventory contraction across the supply chain was what led to a sharp decline in customer inventories, which will continue into the first quarter.

It all overshadowed what had been a "tremendous year for Intel," said the chief executive. It launched two major new architectures, the Atom and Nehalem, divested itself of non-strategic businesses, scaled out 45 nanometer manufacturing and completed design of the 32nm process.

"We delivered on our operating goals and nearly all elements under our control. This disciplined execution remains and important distinction for us," Otellini said.

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