Intel profits dip 40 per cent, reports flat PC sales

By Alun Williams

Posted on 20 Apr 2006 at 12:57

Intel, traditionally seen as a bellwether stock for the technology sector, has reported a 40 per cent decline in profits.

The chip giant has announced its first quarter results amid flattening demand, increased inventory problems and strong competition from its rival AMD, which posted bumper results last week.

The figures read as follow: sales for the three months amounted to $8.9 billion, which is a five per cent decline on the $9.4bn of the same period a year ago and, in terms of the bottom line, the net income for the three months is recorded as $1.3 billion, which compares to the $2.2bn for the same three months in 2005, a fall of 40 per cent. It all translates to earnings per share of 23 cents.

To help sweeten shareholders, the company has paid $585 million in cash dividends. Without this 'share-based compensation' the company would have posted a net income of $1.6 billion.

Although some Wall Street analysts described the results as 'a disaster' they were not taken by surprise, and Intel's stock rose slightly before the end of trading yesterday.

'We believe PC growth rates have moderated over the course of the past few quarters, leading to slower chip-level inventory reductions at our customers and affecting our revenue in the first half of the year,' said Intel President and CEO Paul Otellini.

More positively, Otellini asserted that the company 'made excellent operational progress during the quarter'. He highlighted the volume of shipments of 65nm dual-core processors, and claimed a strong market acceptance for both the Centrino Duo mobile platform and the Viiv platform for the digital home.

'We plan to launch new processors based on the Intel Core microarchitecture in the third quarter,' added Otellini, 'giving Intel performance leadership across the server, desktop and mobile segments and setting the stage for a strong second half.'

Intel has also announced that it will be spending $2.9 billion to repurchase 138.5 million shares.

In terms of outlook, the company expects revenues to be between $8.0 billion and $8.6 billion, which would still be below normal seasonal patterns.

You can read the full figures on the Investor relations section of the Intel website.