Intel Fails to Meet Its Targets By LAURIE J. FLYNN
SAN FRANCISCO, Jan. 17 - Intel, the world's largest chip maker, said slower sales of desktop computers and weaker prices led it to miss its revenue target for the fourth quarter, causing the stock to decline more than 9 percent in late trading on Tuesday. The disappointing earnings report made for a rocky start to the year, coming as Yahoo also missed targets on Tuesday, causing technology stocks to decline across the board. I.B.M.'s shares, however, managed to hold steady in after-hours trading, as that company reported solid profit growth for the quarter. [Page C6.] Intel, a bellwether for the technology industries, reported revenue of $10.2 billion for the fourth quarter, up from $9.6 billion in the quarter in 2004, a 6 percent increase. Revenue fell $200 million short of the low end of the company's own forecast, issued less than a month ago. Company executives insisted that December, which is traditionally strong for chip sales, was a weak end to an otherwise strong year for Intel. Andy D. Bryant, Intel's chief financial officer, said the sluggish sales in the quarter were the result of a shortage of chipsets, components that work with microprocessors. Some of the chipsets come from outside suppliers. He said "2005 was a great year punctuated by a difficult December." Intel has been facing intense competition from Advanced Micro Devices, which reports its fourth-quarter results Wednesday. Mr. Bryant said Intel had probably lost about a percentage point of market share in the fourth quarter. But Paul S. Otellini, Intel's chief executive, told analysts that he felt Intel would regain market share as the company ramped up its dual-core processor line this year. "We will be able to retake share in 2006," Mr. Otellini said. "We're starting out in more of a hole than we had thought." The company, based in Santa Clara, Calif., said the shortage of chipsets meant it was not able to sell as many desktop computer processors as expected. Intel executives also blamed the revenue shortfall on lower-than-expected prices. Net profit was $2.45 billion, or 40 cents a share, for the quarter, up 16 percent, compared with a profit of $2.12 billion, or 33 cents a share, in the period in 2004. Wall Street analysts had forecast that the company would earn 43 cents a share on sales of $10.56 billion, according to a survey by Thomson Financial. The report drove Intel's shares down more than 9 percent in after-hours trading; they closed down 27 cents, or roughly 1 percent, at $25.52, at the close. Further disappointing Wall Street, Intel executives said first-quarter revenue was likely to be lower than expected as well. The company forecast first-quarter revenue of $9.1 billion to $9.7 billion, below the Wall Street consensus estimate of $10.05 billion. On Tuesday, Intel was buoyed by a Merrill Lynch analyst report that warned that A.M.D. might not be able to maintain its growth in the face of Intel's arsenal of new products. Merrill Lynch downgraded A.M.D. stock from neutral to sell. In his report, Joe Osha wrote that the "Intel product road map should show improvement during 2006." Shares of A.M.D. fell $1.27, to close at $32.86. But negative news about A.M.D. did not alter Wall Street's concerns about Intel. Tim Luke, an analyst with Lehman Brothers, called Intel's guidance for the first quarter "disappointing," and he said it would lead investors to question whether Intel could stem the loss of market share as quickly as company executives would like. Intel's gross margin was 61.8 percent in the fourth quarter, below the company's expectation of 63 percent. The company said revenue in the Asia Pacific region was essentially flat from the third quarter, and that revenue in North and South America was down from the third quarter. The company expects gross margin for the first quarter to reach 59 percent. Intel's failure to meet expectations came as a surprise to investors on Tuesday because the company announced in December that it was narrowing its forecast to $10.4 billion to $10.6 billion, but did not lower the estimate. At the time, Mr. Bryant told investors that a shortage of chipsets had most likely caused A.M.D. to gain market share from Intel, but that Intel was benefiting from strong sales of notebook computers. Because the quarterly report proved to be a surprise even to Intel, the company said it would no longer provide midquarter financial updates as it has long done. _______________________________oOo______________________________ William D. Bandes [EMAIL PROTECTED] Zephyr Cove NV USA ___________________________________________________________________________ To unsubscribe send a mail message with a SUBJECT line of "unsubscribe" to <[EMAIL PROTECTED]> or <[EMAIL PROTECTED]>
