Slow desktop chip sales hit Intel Q4

Intel revenue came in below the company's own updated forecast for its 2005 fiscal fourth quarter, due to desktop processor unit shipments that were lower than expected, the company said Tuesday.

Intel announced revenue of $US10.2 billion for the quarter that ended December 31, 2005, missing company expectations of between $US10.4 billion and $US10.6 billion that it announced in December. Still, revenue was up from the $US9.6 billion reported in the year-earlier quarter.

Intel's net income for the quarter was $US2.5 billion, up from the year-earlier quarter, when it reported net income of $US2.1 billion. However, earnings per share were $US0.40, missing by $US0.03 per share an analyst consensus estimate from Thomson First Call.

Intel also filed its year-end results. The company reported revenue of $US38.8 billion for the year, a 13.5 per cent increase from revenue of $US34.2 billion reported for fiscal 2004. Net income for the year was $US8.7 billion, a 15 per cent increase over net income of $US7.5 billion for 2004.

Following the announcement, Intel's stock price plunged more than 8 per cent in after-hours trading.

For the 2006 first quarter that is currently in progress, Intel expects revenue to be between $US9.1 billion and $US9.7 billion. For fiscal 2006, the company expects revenue to be 6 per cent to 9 per cent higher than the full-year figure for 2005.

On a conference call, Intel executives attributed the lower than expected shipments of processors to inventory problems. More specifically, Intel did not have the inventory to meet demand for desktop chips, so it did not ship as many processors as the company had expected, executives said.

"We are starting out in a bit more of a hole for 2006 then we first had thought," Intel chief executive officer and president, Paul Otellini, said.

Inventory levels are returning to normal, as Intel has been and expects to continue increasing chip inventory in the first quarter. Intel will focus on stabilising inventory levels for the rest of the year following these first-quarter efforts.

The recent release of Apple computers built on Intel chips also should increase shipments of Intel processors in the current quarter over the fourth quarter of 2004, Otellini said.

Intel's revenue results varied according to global geographic regions. The company reported $US5.1 billion in revenue in Asia-Pacific, a year-over-year increase of 16 per cent. In Japan, which the company breaks out separately, the company posted revenue of $US945 million, an increase of 11 per cent year-over-year. Revenue for Europe, however, was flat year-over-year at $US2.3 billion.

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Elizabeth Montalbano

IDG News Service
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