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Thu, Jan 19, 2006 - Page 12 News List

Intel shares plummet on weak result

TARGETS MISSED A lack of chipsets was partly to blame for slower sales, and the company also likely lost some market share, an executive said


Intel Corp, the world's largest chipmaker, said slower sales of desktop computers and weaker prices led it to miss its revenue target for the fourth quarter, causing the stock to decline more than 9 percent in late trading on Tuesday.

The disappointing earnings report made for a rocky start to the year, coming as Yahoo Inc also missed targets on Tuesday, causing technology stocks to decline across the board. IBM Corp's shares, however, managed to hold steady in after-hours trading, as that company reported solid profit growth for the quarter.

Intel, which is a bellwether for the technology industry, reported revenue of US$10.2 billion for the fourth quarter, up from US$9.6 billion in the quarter in 2004, a 6 percent increase.

Revenue fell US$200 million short of the low end of the company's own forecast, issued less than a month ago. Company executives insisted last month, which is traditionally strong for chip sales, was a weak end to an otherwise strong year for Intel.

Andy Bryant, Intel's chief financial officer, said the sluggish sales in the quarter were the result of a shortage of chipsets, components that work with microprocessors. Some of the chipsets come from outside suppliers.

He added that, "2005 was a great year punctuated by a difficult December."

Intel has been facing intense competition from Advanced Micro Devices Inc, which was to report its fourth-quarter results yesterday.

Bryant said that Intel had probably lost about a percentage point of market share in the fourth quarter.

But Paul Otellini, Intel's chief executive, told analysts that he felt Intel would regain market share as the company ramped up its dual-core processor line this year.

"We will be able to retake share in 2006," Otellini said. "We're starting out in more of a hole than we had thought."

The company, based in Santa Clara, California, said the shortage of chipsets meant it was not able to sell as many desktop computer processors as expected. Intel executives also blamed the revenue shortfall on lower-than-expected prices.

Net profit was US$2.45 billion, or US$0.40 a share, for the quarter, up 16 percent, compared with a profit of US$2.12 billion, or US$0.33 a share, in the period in 2004. Wall Street analysts had forecast that the company would earn US$0.43 a share on sales of US$$10.56 billion, according to a survey by Thomson Financial.

The report drove Intel's shares down more than 9 percent in after-hours trading; they closed down US$0.27, or roughly 1 percent, at US$25.52, at the close.

Further disappointing Wall Street, Intel executives said first-quarter revenue was likely to be lower than expected as well. The company forecast first-quarter revenue of US$9.1 billion to US$9.7 billion, below the Wall Street consensus estimate of US$10.05 billion.

Tim Luke, an analyst with Lehman Brothers, called Intel's guidance for the first quarter "disappointing," and he said it would lead investors to question whether Intel could stem the loss of market share as quickly as company executives would like.

Intel's gross margin was 61.8 percent in the fourth quarter, below the company's expectation of 63 percent.

The company said revenue in the Asia-Pacific region was essentially flat from the third quarter, and that revenue in North and South America was down from the third quarter.

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