Intel Corp will cut 4,000 jobs, or 4.8 percent of its staff, after a prolonged slump in personal-computer demand caused second-quarter sales at the world's biggest chipmaker to fall below analysts' forecasts.
"We were expecting to see an economic recovery in our business, and right now, we see no signs of it,"Chief Financial Officer Andy Bryant said in an interview.
Third-quarter sales will be US$6.3 billion to US$6.9 billion, compared with the US$6.72 billion average estimate of analysts surveyed by Thomson First Call, Intel said. Corporate PC demand still hasn't recovered from a slowdown that began in late 2000, and the chipmaker is eliminating jobs and cutting capital spending to "hunker down" until sales improve, Bryant said.
Second-quarter net income rose to US$446 million, or US$0.07 a share, from US$196 million, or US$0.03, a year earlier. Earnings were helped by lower acquisition-related costs. Sales slipped to US$6.32 billion, less than the average analyst forecast for US$6.34 billion, based on a survey by First Call.
Intel shares climbed to US$18.62 following the report. The stock slipped US$0.76 to US$18.36 in regular US trading. The stock has dropped 42 percent this year.
"It's a relatively low number of jobs," said Marian Kessler, whose Rutherford Investment Management owns Intel shares and manages US$25 million. "That could have been a higher number." Profit in the recent period would have been US$620 million, or US$0.09 a share, excluding acquisition costs, Intel said. On that basis, profit missed the US$0.11 average estimate in a First Call survey. In last year's second quarter, sales were US$6.33 billion.
Gross margin, or the percentage of sales left after subtracting manufacturing costs, will be 51 percent this year, narrower than the 53 percent predicted earlier, Intel said.
The company cut its projected spending on new equipment to US$5 billion to US$5.2 billion from an earlier plan to invest US$5.5 billion. The reductions won't be in plant-related spending, the company said.
The chipmaker also trimmed its research and development spending plans to US$4 billion from US$4.1 billion.
"The recovery is being pushed out," Bryant said. "Even though the economy appears to be recovering in other parts of the US, my guess is most CEOs will wait until they're confident of a recovery before starting to spend in the [information technology] space."
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