Computer
Sales of personal-computer processors likely bottomed out in the first quarter after manufacturers worked through their stockpiles of parts, Otellini said. While the worst of the slump is “probably now behind us,” Intel isnt ready to predict growth this quarter, he said, disappointing investors.
“The real expectation was for guidance of sequential growth,” said Alex Gauna, an analyst at JMP Securities LLC in San Francisco. Gauna, who doesnt own Intel shares, expects them to perform worse than the rest of the market. “Its not as good as what the Street was looking for.”
Intel, based in Santa Clara, California, fell as much as 96 cents to $15.05 in extended trading yesterday after announcing first-quarter earnings. The stock had climbed 9.2 percent this year.
For the second quarter in a row, Intel didnt give detailed sales and profit forecasts, citing “limited visibility.” The company expects sales to be little changed in the current period, from the $7.1 billion in the first three months of the year. That represents a year-over-year decline of 25 percent.
“The industry is at a new baseline,” Otellini said on a conference call with analysts late yesterday. The recession will force the company to rebuild from a lower level, he said.
Stable Ground?
First-quarter net income plunged 55 percent to $647 million, or 11 cents a share, from $1.44 billion, or 25 cents, a year earlier, the company said. Sales fell 26 percent to $7.15 billion. Personal-computer makers slashed chip orders last quarter as they coped with the industrys worst slump since 2001.
“I at least think things are coming back to stabilization,” said Pat Becker Jr. at Becker Capital Management in Portland, Oregon. He manages $1.6 billion in assets, including Intel shares. “I am not that unhappy with flat guidance.”
Intels sales typically decline in the second quarter from the first. They then begin to rise again in the third quarter, when computer makers increase orders to meet back-to-school demand.
“Were dealing with a lot of economic uncertainty,” Chief Financial Officer Stacy Smith said yesterday in an interview. “Its still a very volatile economic environment.”
Using Up Stock
Gross margin, or the percentage of sales remaining after production costs, shrank to 46 percent from 53.1 percent in the fourth quarter. The margin will probably be in mid-40s this quarter, Intel said.
Intels results could indicate that computer sales will start to improve, benefiting customers such as Dell Inc. and Hewlett-Packard Co., according to Rick Davenport, an analyst for the supply-chain analysis service Connexiti LLC.
Intel, whose microprocessors run more than 80 percent of the worlds PCs, kicked off two weeks of earnings reports by big technology companies. The widespread use of Intels chips in everything from laptops to supercomputers makes its results an indicator of industry demand.
Google Inc. will report its earnings later this week, followed by International Business Machines Corp. and Microsoft Corp. next week.