Intel slides as profits and sales miss targets

Intel, the world’s biggest chipmaker, disappointed Wall Street on Tuesday with fourth-quarter profits and sales below expectations and a cautious outlook for 2008.

The company blamed problems in its non-core memory chip business for exerting a drag on its results. Its shares fell 14 per cent in after-hours trading to $19.50 – its worse-than expected figures spooking the market a day after IBM had kicked off the reporting season with strong earnings.

Intel reported earnings per share of 38 cents on revenues of $10.7bn. The consensus estimates of Wall Street analysts surveyed by Reuters were for earnings of 40 cents and revenues of $10.84bn.

For the current quarter, it forecast revenues of $9.4bn to $10bn – the midpoint of $9.7bn being below Wall Street expectations of $10bn.

For the full year, Intel improved on its 2006 “annus horribilis”, when it lost market share and launched a price war with rival AMD, while restructuring the company.

In 2007, revenues rose 8 per cent to $38.3bn after falling 9 per cent in 2006. Earnings per share rose 37 per cent to $1.18.

Paul Otellini, chief executive, said customers had embraced the new Core design for its chips, introduced in mid-2006, “extending our competitive leadership and driving a significant gain in operating results”.

“We enter 2008 with the best combination of products, silicon technology and manufacturing leadership in our history,” he said.

Revenues for its main microprocessor and chipset business were as expected in the fourth quarter, Intel said, with strong performances in the server, mobile and desktop segments. Gross margins of 58.1 per cent were up nearly 7 percentage points on the third quarter.

But revenues for its non-core “Nand” flash memory chips were lower than forecast due to lower average selling prices in the competitive market.

Intel said restructuring and asset impairment charges of $234m were higher than its previous estimates of $130m due to an impairment of its “Nor” flash assets related to a spin-off of the business into a joint venture with STMicroelectronics. Intel admitted last month that the credit crunch had delayed the spin-off as terms were renegotiated with lenders.