Intel posts loss on EU fine, but upbeat on rest of '09

Intel logoIntel on Tuesday posted a second-quarter loss of $398 million, stung by a fine imposed by the European Union, but the chipmaker is optimistic about the second half of the year as it beat analyst estimates.

The loss of 7 cents a share compares with a profit of $1.6 billion, or 28 cents a share, reported a year ago. Without the $1.45 billion EU fine, Intel had a profit of $1 billion, or 18 cents per share. Analysts had expected a profit of 8 cents per share.

"Intel's second-quarter results reflect improving conditions in the PC market segment with our strongest first- to second-quarter growth since 1988 and a clear expectation for a seasonally stronger second half," said Paul Otellini, Intel CEO in a statement.

In an earnings conference call Tuesday afternoon, Otellini qualified this statement somewhat, saying that there won't be a "recovery to prior levels."

Revenue was $8 billion, down from a year-earlier $9.5 billion. Revenue from Intel Atom microprocessors, used widely in Netbooks, and chipsets was $362 million, up 65 percent sequentially.

Gross margin, a crucial profit indicator, was 51 percent, up 5.5 points sequentially but down from 55.4 percent posted a year earlier.

The replenishment of inventories by customers was a positive sign, said Stacy Smith, Intel's chief financial officer, speaking during the conference call. "In anticipation of a seasonally up second half, the supply chain (buyers of Intel chips) began refilling inventory positions that had been depleted over the past two quarters," Smith said. "As a result, we experienced better-than-expected demand for microprocessors and chipsets."

"Consumer purchases led the way," Otellini said in the conference call, referring to consumer laptops that saw growth.

Corporate enterprise business, however, was "weak," Otellini said. Though the Intel CEO expects companies to update aging computers, "we're not counting on that in large measure in 2009," he said. Dell executives said Tuesday that global technology spending will likely remain weak for the near term as companies delay computer purchases, according to an AP report.

Otellini said he had "no opinion" on the impact of Windows 7--due later this year--in the consumer market but expected businesses to "get ready for buying next year."

Market researcher iSuppli said Tuesday that for the first time since the Dot-Com bust of 2001, the global PC market will suffer a contraction in unit shipments in 2009, due to a combination of falling IT spending and plunging sales of desktop computers.

Global PC shipments are expected to decline to 287.3 million units in 2009, down 4 percent from 299.2 million in 2008, iSuppli said.

"If you look across the pond in Europe demand is decidedly weak," said Ashok Kumar, an analyst at investment bank Collins Stewart. "And in China all the anecdotal data points are no better than tepid. None of the geographies are firing," Kumar said.

Source: CNET

Tags: Intel

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