Intel revenue drops on weak economy, poor sales

Intel blames challenging economy for sluggish sales

Intel on Tuesday said its revenue and profit dropped during the third quarter of fiscal 2012 compared to the same period a year earlier, and blamed a tough economy for poor sales of its products.

The company's profit was US$2.97 billion for the quarter ending Sept. 29, dropping from $3.47 billion reported in the same quarter last year. The company reported earnings per share of $0.58, or $0.60 excluding one-time items. Analysts polled by Thomson Financial expected EPS of $0.49.

"Our third-quarter results reflected a continuing tough economic environment," said Intel CEO Paul Otellini in a statement.

Intel's revenue was $13.5 billion during the third quarter, dropping from the $14.2 billion in the same quarter last year. Analysts expected revenue of $13.2 billion.

Chip makers are struggling as the PC market slumps. Advanced Micro Devices last week cut its revenue forecast for the third quarter, saying a weak economy was hurting demand for its products. Intel in September shaved close to $1 billion off its third revenue expectations from its previous outlook in anticipation of weak demand for its products. Intel previously said third-quarter revenue would be between $13.8 billion and $14.8 billion, but lowered it to between $12.9 billion and $13.5 billion.

The PC market is in a decline, with research firm IDC last week saying that worldwide PC shipments in the third quarter dropped by 8.6 percent compared to the same quarter a year earlier. However, analysts have said that the PC market could start recovering by the end of the fourth quarter after shipments of Windows 8 PCs pick up.

Revenue from Intel's PC Client Group, which deals in PC chips, was $8.6 billion, down 8 percent compared to the same quarter last year. However, a bright spot was the Data Center Group, which deals in server chips and recorded revenue of $2.7 billion, increasing by 6 percent year-over-year.

PC makers are clearing off inventory of old Windows 7 PCs ahead of the launch of Microsoft's new OS, Windows 8. New PCs with Intel's Core processors code-named Ivy Bridge will become available starting on Oct. 26, and top PC makers Hewlett-Packard and Lenovo are expected to ship tablet with the low-power Atom processor code-named Clover Trail.

"As we look to the fourth quarter, we're pleased with the continued progress in Ultrabooks and phones and excited about the range of Intel-based tablets coming to market," Otellini said.

Intel is still making its way into the smartphone market, but scored a big win with Motorola, which announced an Intel-based smartphone in September.

For the fourth quarter, Intel is expecting revenue to be $13.6 billion, plus or minus $500 million. In written commentary, Intel's chief financial officer Stacy Smith said the outlook was cautious and takes into account concerns about a slowing enterprise market segment and soft demand for products in consumer and mature markets.

Agam Shah covers PCs, tablets, servers, chips and semiconductors for IDG News Service. Follow Agam on Twitter at @agamsh. Agam's e-mail address is agam_shah@idg.com

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Agam Shah

IDG News Service
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