Intel sees more hard times in 2009

SAN JOSE, Calif. (AP) -- Intel Corp. appears to be playing it safe with an ugly first-quarter forecast.

The chip maker reported Thursday that profit plunged 90 percent and sales slipped 23 percent during the last three months of the year, matching analysts' subdued estimates.

Wall Street was braced for the bad news: Intel had lowered its fourth-quarter guidance twice, including once just last week, warning that weaker-than-expected PC demand was hammering down demand for its microprocessors.

So what about 2009? Intel said it doesn't know when demand will pick back up, so the Santa Clara-based company set the bar low and offered first-quarter guidance at the low end of what analysts were expecting.

Intel said it 2009 sales will likely be around $7 billion, which translates to a decline of more than 25 percent from the first quarter of 2008. Gross profit margin should also sink sharply, falling from more than 50 percent of sales to the low-40 percent range, it said.

Gross profit is a key measure of how well a company is controlling its costs, but falling demand, heavy investment in factory upgrades and big costs for running factories at less than full throttle will all take their toll on Intel's bottom line.

Intel said the financial crisis has made it so difficult to predict revenue that the company wouldn't offer a precise estimate. Analysts surveyed by Thomson Reuters were expecting $7.3 billion in sales, on average, but estimates ranged from $6.6 billion to as high as $9.3 billion.

The profit forecast was below many estimates, but was good enough to send Intel's shares up 3.8 percent in after-hours trading.

"I don't think they're good numbers, but they're good numbers to start from," said Cody Acree, senior semiconductor analyst with Stifel, Nicolaus & Co. "We all knew they would be bad, and that they'd come down, but they've set a base to work from."

Intel's Chief Financial Officer Stacy Smith said in an interview that computer-makers' inventory levels fell in the fourth quarter and continued falling into the first quarter, which means they're not buying as many new chips. He said Intel's product lineup positions the company well to take advantage when demand starts rising again, but Smith cautioned that no one knows yet when that might be.

"It's very difficult to precisely call when we'll hit the bottom," he said.

In the fourth quarter, Intel's net income was $234 million, or 4 cents per share, compared with $2.3 billion, or 38 cents per share, in the year-ago period.

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