Intel's Revenue, Net Income Drop

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On Tuesday, Intel reported that both its revenue and net income slid downward in the most recent quarter. It blamed the weak economy for declining sales of PCs.

According to eWeek’s Jeffrey Burt, “Intel continues to get hit by the stalling PC market, and executives said it could be several months before the industry sees whether it gets a bounce out of the upcoming release of Microsoft’s Window’s 8 operating system. The giant chip maker in the third quarter once again felt the impact of the slowing sales of PCs, with net income coming in at $2.97 billion, a drop from $3.47 billion during the same period last year. Revenue came in at $13.5 billion, a 5.5 percent drop from the third quarter in 2011, but slightly better than the lowered $13.2 billion the company forecast in September.”

Computerworld quoted Intel CEO Paul Otellini, who stated, “Our third-quarter results reflected a continuing tough economic environment.”

AnandTech’s Ryan Smith reported, “Intel has taken an unusually conservative stance on Q4, projecting that both revenue and their all-important gross margin will be down in Q4 of 2012 as compared to 2011. Specifically, Intel is projecting that their gross margin will be 57%, as compared to their incredible 65.5% gross margin from last year. On a quarterly or even yearly basis this would be a major shift for Intel, and it is a strong indicator that the weakness in the PC market will hurt Intel by more than just reducing their net income a bit like what happened in Q3.” Smith added, “Due to a buildup in inventory and a desire to prevent further buildup in what Intel is projecting to be a weak quarter, Intel will be taking the unusual step of letting quite a bit of fab capacity go idle. For Q4 Intel’s fab utilization will be sub-50%.”

Bloomberg’s Ian King and Sarah Frier observed, “The global economic slowdown is prompting companies to curtail technology spending and pushing consumers to favor mobile devices like Apple Inc.’s iPhone over personal computers, eroding profitability at Intel Corp.” They quoted JMP Securities analyst Alex Gauna, who said, “It’s not looking good out there.”