By Ian King
Jan. 7 (Bloomberg) — Intel Corp., the world’s largest chipmaker, said fourth-quarter sales dropped 23 percent, missing a forecast that it cut by $1 billion less than two months ago as the global recession kills demand for personal computers.
The stock declined as much as 6.7 percent after Intel said revenue fell to $8.2 billion from $10.7 billion a year earlier. In November, Intel forecast that sales would be about $9 billion, compared with an earlier prediction of at least $10.1 billion.
Plummeting sales at Intel, whose chips run about 80 percent of the world’s personal computers, signal falling demand across the technology industry. Chief Executive Officer Paul Otellini, 58, has said he expects the current U.S. recession to be the worst of his lifetime.
“If Intel is having such a tough time, I am bracing from what we will see from its peers,” said Hakim Kriout, a portfolio manager at Grigsby & Associates, a New York-based securities trading firm. “Intel’s numbers are a bad augury for things to come.”
There was “further weakness” in demand for products that use chips, Intel said in a statement today. The company also wrote down the value of its investment in Clearwire Corp. by $950 million.
Intel, based in Santa Clara, California, fell 57 cents, or 3.7 percent, to $14.80 on the Nasdaq Stock Market at 12:10 p.m. New York time. It dropped as low as $14.34 and pulled down shares of customers including Hewlett-Packard Co. The Standard & Poor’s 500 Index fell 1.8 percent to 917.91.
Industry Indicator
Intel’s sales decline surpassed the 20 percent drop it had in the fourth quarter of 2001, after the technology bubble burst. Analysts had estimated sales of $8.8 billion and profit of $1.32 billion on average, according to a Bloomberg survey.
Intel’s dominance of the processor market makes it a bellwether for technology spending, since its chips are among the first components ordered by computer manufacturers. The company will report complete results on Jan. 15, kicking off two weeks of earnings reports by technology companies, including Microsoft Corp., International Business Machines Corp. and Google Inc.
Time Warner Inc., the world’s largest media company, said today it will report a loss for 2008 after writing down the value of its cable, publishing and Internet assets by about $25 billion in the fourth quarter.
Clearwire
Clearwire, trying to challenge AT&T Inc. and Verizon Wireless, is building a network for mobile phones and laptops using an Intel-backed technology called WiMax. Kirkland, Washington-based Clearwire, which sold shares in an initial public offering in 2007, fell 64 percent last year.
Total PC production fell 15 percent in the fourth quarter from the previous three months, according to Craig Berger, an analyst at Friedman, Billings, Ramsey & Co. in New York. PC companies made 3 percent fewer notebooks and 27 percent fewer desktop machines, he estimated.
“The whole supply chain is down 20 percent to 30 percent,” said Doug Freedman, an analyst at Broadpoint AmTech in San Francisco. He had predicted that Intel would report sales of $8.27 billion for the quarter. Computer makers “didn’t build anything — they shut down their factories.”
Hewlett-Packard, the world’s biggest PC maker, fell 2.6 percent to $38.29 in New York Stock Exchange composite trading. The Philadelphia Semiconductor Index, made up of 18 of the largest chip and chip-equipment companies, lost 3.2 percent.
Intel said its fourth-quarter gross margin, the percentage of sales left after production costs, was at the lower end of the range it had predicted. In November, the company projected a margin of 55 percent, plus or minus “a couple of points.” The margin is the only measure of profit that Intel forecasts publicly.
Intel’s smaller rival, Advanced Micro Devices Inc., cut its sales forecast on Dec. 4, saying it expected fourth-quarter revenue to decline about 25 percent from the $1.59 billion it reported in the third quarter.
The two companies control the market for microprocessors, the main component in personal computers.
