Intel's net profit drops 90%

IDG News Service - Intel Corp.'s fourth-quarter profit plunged 90% from a year earlier, as the chip maker battled a worsening economy and recorded a steep loss from investments.

The company recorded net profit of $234 million for the quarter ended Dec. 27, compared to $2.27 billion in the same quarter a year earlier. The net profit also fell short of the $257.22 million consensus expectation from analysts polled by Thomson Reuters.

The results included a loss of $1.1 billion from equity investments and interest. That loss was primarily due to a billion-dollar reduction in the value of Intel's investments in Clearwire, the company said.

The company's fourth-quarter revenue was in line with lowered expectations of $8.2 billion. Fourth-quarter revenue was down 23% year-over-year and 19% sequentially. Revenue from microprocessors and chip sets was lower compared to the third quarter.

The bright spot for Intel this quarter was sales of Atom chips that go into netbooks, small laptops designed for Web surfing and productivity applications. Revenue from Atom microprocessors and chip sets was up 50% sequentially to $300 million.

Intel did not project revenue guidance for the first quarter of 2009, citing "economic uncertainty and limited visibility."

While the economic environment is uncertain, the company is adjusting its business plans to adapt to build for the future, said Paul Otellini, Intel president and CEO, in a statement. The company is entering new markets and has cut costs by around $3 billion since 2006, he said.

The restructuring yielded $800 million in savings in 2008, Otellini said during a conference call yesterday. The company ended the year with approximately 84,000 employees, down 3% from a year earlier.

"Intel has weathered difficult times in the past, and we know what needs to be done to drive our success moving forward. Our new technologies and new products will help us ignite market growth and thrive when the economy recovers," Otellini said.

The company hopes to ramp up to the 32-nanometer process technology to lower chip-manufacturing costs and increase production. It will then be able to make more chips at lower costs, which should add efficiencies to the production process, said Stacy Smith, Intel's chief financial officer, during the call.

"We are absolutely prioritizing the investment that it takes to get to 32nm process technology ... we are going to get there as fast as we possibly can. That gives us a performance advantage, cost advantage and allows us to get to this higher level of integration that the future markets we want to serve requires," Smith said.

Intel hopes to fit integrated chips made using the new manufacturing process into devices like set-top boxes and TVs, which will create new markets and revenue opportunities, Smith said.