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Intel describes how credit crunch can hurt
- — 03 November, 2008 10:33
Intel added warnings in its quarterly filing with the U.S. Securities and Exchange Commission about how the deteriorating economic conditions worldwide may negatively affect its business.
"The recent financial crisis could negatively affect our business, results of operations, and financial condition," Intel wrote in its 10Q filing, published by the SEC on Friday.
Intel spells out how the credit crunch in particular could affect the company: "There could be a number of follow-on effects from the credit crisis on Intel's business, including insolvency of key suppliers resulting in product delays; inability of customers to obtain credit to finance purchases of our products and/or customer insolvencies; counterparty failures negatively impacting our treasury operations; increased expense or inability to obtain short-term financing of Intel's operations from the issuance of commercial paper; and increased impairments from the inability of investee companies to obtain financing."
The warnings echo nearly identical language in Intel's third-quarter earnings report, released Oct. 14.
During a conference call two weeks ago to discuss the earnings report, executives focused mainly on how the worldwide economic problems might affect demand for Intel products, without discussing much about how the credit crisis might affect its suppliers or companies Intel invests in. The executives said they were concerned but were also optimistic.
"I'm of the opinion that technology will do well during this downturn, for the simple fact that we sell tools of productivity," said Paul Otellini, Intel's president and CEO, during the call.
In 10Q filings, public companies typically detail risks, sometimes dire, that they face. But it's notable that Intel has added new language about the economic downturn.
In the filing, Intel also reiterated plans to issue an unusual mid-quarter business update on Dec. 4, in part because the company has struggled to predict demand given the economic conditions. "The higher chipset revenue we experienced in the third quarter would normally be a sign that customers are building ahead of a strong fourth quarter," the company wrote in the 10Q. "However, with the current macroeconomic environment, it is hard to discern what demand will be for the fourth quarter of 2008."