Posted on 12/08/2005 8:15:11 PM PST by BenLurkin
SAN JOSE, Calif. (AP) -- Intel Corp. narrowed its fourth-quarter sales forecast Thursday but left the midpoint unchanged as the world's largest chip maker said demand has been consistent with its earlier expectations.
The Santa Clara, Calif.-based company said it expects revenue of $10.4 billion to $10.6 billion in the three months ending in December, compared with the previous range of $10.2 billion to $10.8 billion. The company does not release earnings forecasts.
"Growth in emerging markets, demand for mobility and advances in manufacturing are delivering healthy growth in Intel's revenue and gross profits," said Andy Bryant, Intel's chief financial officer.
But the new range is slightly lower than Wall Street estimates. Analysts were expecting Intel to earn 43 cents per share on sales of $10.61 billion for the period, according to a survey by Thomson Financial.
Intel shares lost 77 cents, or 3 percent, to $24.93 in extended-session trading after the update was released. Earlier, they lost 45 cents to close at $25.70 on the Nasdaq Stock Market.
In October, Intel said sales could be affected by supply constraints and a buildup in client inventory.
"They are more capacity constrained -- more than they're letting out," said Apjit Walia, a semiconductor analyst at RBC Capital Markets. "They're missing some of the upside -- and essentially that business will fall into the next quarter."
Bryant said the inventory buildup has been working itself down. At the same time, the company has begun integrating chipsets built by third-party vendors in its motherboards to help relieve short supplies of the chips that serve as the nervous system for computers.
"We think that will continue to improve through the first part of the year," Bryant said.
Intel also continues to face stiff competition from smaller rival Advanced Micro Devices Inc., which has been selling server and PC chips that have beat Intel's offerings in some performance tests. AMD also could see its share of the market rise as a result of Intel's tight supplies.
Intel narrowed its gross margin percentage -- a measurement of the difference between sales and the cost of the products sold -- to 63 percent, plus or minus a point, with the final number expected to be slightly above the midpoint of the new range.
Previously, the company said it expected a gross margin percentage of 63 percent, plus or minus a couple points. In the fourth quarter of last year, the gross margin was 56 percent.
In another change, capital spending for 2005 is now expected to be below the midpoint of its previous forecast of $5.9 billion, plus or minus $200 million.
We're doomed! Doomed I tell you!
This is the worst economy in the last 75 years!
"some" performance tests? AMD server chips spank the bejeezus out of Intel server chips anyway you care to measure them. It will take many years and some as yet undetermined technological developments by Intel to have a prayer of catching AMD in the server market. AMD has an extremely aggressive roadmap that is actually delivering.
The only real downside is that our server vendors have Xeon servers looking for buyers and a backlog of orders for Opteron based systems. And then there are companies like Dell sitting around with a thumb up their ass...
Good stuff, BL.
But unemployment is almost 5%. That is atrocious. Don't you remember the good old days, during Clinton's reign, when unemployment was a mere 2%.
We're going to hellinahandcart. :)
Since AMD server chips are of the same architecture as AMD's desktops chips, minus a couple hypertransport lines and sometimes the amount of cache, AMD is spanking Intel in desktops too. Someone with a 939 pin socket desktop can plug an Opteron in no problem.
True enough for the most part. However, I do not think there is as much competition for performance on the desktop as there is in the server market. While AMD plays well with the horsepower fetishists in the desktop market, most people do not care that much because they do not see it. My workstation at work is an old 1.1GHz AMD Athlon, and it is plenty fast. In the server room, the architectural differences become much more stark, with nominally equivalent servers (dollar wise) having vastly different performance, scalability, and load handling profiles. In the data center, your average everyday use of a server that handles any kind of load really does make it very apparent how much better the Opterons are in that environment, such that anyone with a clue generally buys Opteron by default because it is a guaranteed scalability and performance enhancement.
Intel can compete in the desktop market at large, but they have lost the server market. The mobile market is still in the air; Intel started with the clear edge, but AMD has caught up nicely such that it could become very competitive.
Well said. Merry Christmas Tortoise.
Contract inertia to a limited extent, but more importantly Intel makes a huge chunk of its profits in businesses that have nothing to do with CPUs. That is the advantage of having a very diversified portfolio, which Intel does have. AMD has had its problems, but they are growing their revenue by eating into Intel's share. Fortunately for Intel, they make gobs of money in unrelated market sectors.
AMD does have some side businesses (flash memory, embedded CPU architectures) but their bread and butter is the AMD64 line now, which has turned into a blockbuster product in many ways. They basically went all-in on this architecture and won. At this point, their greatest weakness is fab capacity, which is heavily dependent on IBM's process technologies, and burned a little bit of their technology lead as IBM sorted out their difficulties with the new fab lines.
AMD has been investing a ton of money into building enough fab capacity that they can take on Intel in the production game, which is currently their weak point. They have the silicon to beat Intel, but it has been an expensive and difficult process building the fab capacity because they have always been much smaller than Intel. When their new fabs start coming online, it will make for an interesting market.
Excellent answer. Thank you.
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