Intel Issues Murky Growth Outlook
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Intel put in a strong showing for the third quarter, but due to uncertainty going forward, issued one of the widest ranges of revenue guidance in its history.
The chip giant on Tuesday said it expected revenue to be between $10.1 billion and $10.9 billion in the fourth quarter. Wall Street was expecting around $10.8 billion.
"As we look to Q4, it is hard to know what impact the financial crisis will have on end customer demand," CEO Paul Otellini said in a statement accompanying his company's third-quarter earnings.
Intel reported third quarter net income of $2 billion, or 35 cents a share, compared with $1.8 billion, or 30 cents a share, in the same period last year. Revenue was $10.22 billion, up slightly from the $10.1 billion reported in the third quarter of 2007.
Analysts had expected, on average, earnings of 34 cents a share on revenue of $10.25 billion.
However, Intel (NASDAQ: INTC) could not make many promises going forward. So much so, it will hold a mid-quarter call to update the financial community on whether or not it will wind up with a lump of coal in its stocking for Christmas.
Memory is becoming a real headache for Intel. The company was hit with a greater-than-expected charge of $265 million in the third quarter for Numonyx, its joint-venture with ST Microelectronics to produce NOR flash memory chips.
In Q4, Intel will take a restructuring charge of $250 million dollars from the closure of a NAND flash memory joint venture with Micron. Also, a Singapore memory facility is now on hold.
R&D expenses dip
Expenses will be $2.9 billion, but research and development costs will dip by $200 million, according to Stacy Smith, chief financial officer of the company.
"While the economic outlook has deteriorated over the past quarter, our competitive position has improved," he told a conference call of financial analysts.
Otellini said Intel now has about 83,500 employees worldwide, which is about 20,000 less than it had at its peak in 2006, when he began a program of optimizing company operations. Since then, $3 billion in spending has been cut.
"We've made changes in operations to prepare us for a wide variety of scenarios," he said on the call. "Third quarter operating cash flows of $3 billion and our cash position of $12 billion, combined with little debt, means our balance sheet is in excellent condition."