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Thu, Jan 22, 2009 - Page 10 News List

Intel Corp warns of possible loss in the first quarter

OUT OF STEAM After 87 quarters of profit, the chipmaker may record a loss amid plummeting demand for computers and low capacity utilization

BLOOMBERG

Intel Corp, the world’s largest chipmaker, raised the possibility of reporting a loss this quarter, ending its more than 21-year run of profitability.

“We are not going to wake up in six months with everything rosy again,” Intel CEO Paul Otellini told employees last week in an internal memo obtained by Bloomberg News.

After 87 quarters of profit, the first quarter is “too close to call,” the memo said.

Slumping demand for personal computers has forced Intel to run its factories below capacity, making them less profitable. Last week, the company reported a 90 percent drop in fourth-quarter net income. The possibility that the chip industry’s richest company may not stay profitable underscores a plunge in chips orders for everything from computers to mobile phones.

Intel, based in Santa Clara, California, fell US$0.88 to US$12.86 yesterday in NASDAQ stock market trading. The shares declined 45 percent last year.

Intel doesn’t comment on confidential employee communications, said Chuck Mulloy, a spokesman for the company.

Analysts have estimated a first-quarter profit of US$228.9 million, a Bloomberg survey showed.

Intel said last week that fourth-quarter net income dropped to US$234 million, or US$0.04 a share, from US$2.27 billion, or US$0.38, a year earlier. The company is assuming revenue of about US$7 billion this quarter for planning purposes. That’s not an official forecast and the company said it doesn’t have enough insight to make one. That amount would be a decline of 28 percent from a year ago.

Intel’s failure to give an official forecast was the first time that had happened in Otellini’s 34-year career at the company, according to the memo.

There will be no budget for merit pay or promotions, and Intel will only refill vacant jobs on a selective basis, Otellini said in the memo.

He said he has received e-mails from employees saying they would rather take pay cuts than lose a job or see co-workers terminated.

“We will be focusing on every nickel,” Otellini said in the memo. “Every dollar counts.”

While the company will maintain its investments in future technologies, it plans to cut discretionary spending and slow down factory production. That will force the closure of some sites and cause manufacturing workers to relocate.

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