Despite Thailand Floods, Intel Reports Record 2011 Results

Intel Thursday reported record full-year 2011 revenue of $54.2 billion and earnings per share of $2.39 in the face of severe flooding in Thailand. Yet the company warned the first quarter of 2012 might be affected.

After lowering guidance in December due to the knock-on effect of flooding in Thailand that severely disrupted hard disk drive manufacturing, Intel Thursday bounced back, posting revenue of $13.9 billion for the fourth quarter and $54.2 billion for the full year.

"2011 was an exceptional year for Intel," Intel (NASDAQ:INTC) President and Chief Executive Officer Paul Otellini said. "With outstanding execution the company performed superbly, growing revenue by more than $10 billion and eclipsing all annual revenue and earnings records. With a tremendous product and technology pipeline for 2012, we're excited about the global growth opportunities presented by Ultrabook systems, the data center, security and the introduction of Intel-powered smartphones and tablets."

Intel had initially provided guidance that its fourth quarter revenue would come in at $14.7 billion, plus or minus $500 million. But in December, the chipmaker lowered that guidance by $1 billion to $13.7 billion, plus or minus $300 million, citing the severe flooding in Thailand, which destroyed as much as a quarter of the world's hard disk drive manufacturing capacity. That resulted in PC manufacturers realigning their backlog to match up with the available supply of hard drives, which in turn led them to slow down their orders of Intel processors.

But despite the shortage, Intel Chief Financial Officer Stacy Smith said sales of personal computers remained strong in the fourth quarter.

"Fourth quarter revenue of $13.9 billion was up 21 percent year-over-year," he said. "Revenue in the fourth quarter was negatively impacted by the floods in Thailand and the resulting hard disk drive supply shortages. As a result of the hard disk drive shortages we saw a reduction of orders for microprocessors as customers reduced inventories across the supply chain. Despite this reduction in inventory levels, it is our belief that the shortage did not impact actual sales of personal computers in the fourth quarter with demand trends playing out as expected."

He added, "Gross margin improved 64.5 percent from the third quarter with lower factory start up costs as we ramped production and qualified for sale our next-generation product Ivy Bridge, our first product on 22nm process technology, and lower unit costs."

That said, Smith cautioned that Intel is not quite out of the woods yet with regard to the hard disk drive shortage. He said Intel expects revenue for the first quarter of 2012 to come in at 12.8 billion, plus or minus $500 million.

"The midpoint of this range is down 8 percent from the fourth quarter," he told investors. "This decline is slightly more than the average seasonal decline as we expect the shortage of hard disk drives to continue to impact our business in the first quarter."

Overall, the company's full-year 2011 revenue of $54.2 billion was up 24 percent from the $43.6 billion it achieved in 2010. However, gross margin was down 1.9 points to 63.6 percent. On the other hand, operating income increased 18 percent from $15.7 billion to $18.4 billion. Net income rose 19 percent from $11.5 billion to $13.7 billion, and earnings per share were up 25 percent to $2.53.

Intel's fourth quarter revenue of $13.9 billion was up 22 percent from the $11.5 billion it achieved in the year ago quarter. Gross margin for the quarter was up 0.7 point to 65.5 percent. Operating income rose 20 percent to $4.8 billion and net income was up 11 percent to $3.5 billion for the quarter. Earnings per share for the quarter were up 21 percent to $0.68.

On a percentage basis, Intel's Software and Services Group showed some of the strongest growth for the quarter and full-year, driven largely by the acquisition of McAfee. Smith said Software and Services Group revenue came in at $578 million, up 7 percent from the fourth quarter and 671 percent for the full year. McAfee contributed $478 million of revenue to the fourth quarter 2011 revenue.

The Intel Architecture Group was responsible for the bulk of Intel's fourth quarter revenue at $12.9 billion for the quarter, down 3 percent sequentially from the third quarter but up 16 percent year over year. Inside the Architecture Group, the numbers broke down as follows:

  • The PC Client Group had revenue of $9 billion, down 4 percent from the third quarter but up 17 percent year over year.+
  • The Data Center Group's revenue came in at $2.7 billion, up 8 percent sequentially and also up 8 percent year over year.
  • The other Intel architecture group had revenue of $1.1 billion, down 20 percent sequentially but up 35 percent year over year. The former Infineon wireless division contributed $508 million to the fourth quarter revenue.
  • The Intel Atom microarchitecture was the big loser, with revenue from microprocessors and associated chipsets down 38 percent sequentially and 57 percent year-over-year to $167 million. Intel attributed the steep decline to lower demand for netbooks.

Looking forward, Smith said Intel expects revenue for full-year 2012 to grow in the high single digits. The company also expects to push its gross margin up 1.5 points from 2011 to 64 percent.

Thor Olavsrud is a contributor to InternetNews.com, the news service of the IT Business Edge Network, the network for technology professionals.




Tags: earnings, chips, Intel, microprocessors


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