Intel, the world’s biggest chipmaker, delivered revenues at the top end of its expectations in the fourth quarter helped by higher selling prices for a new line of microprocessors.
Its results were in contrast to a profit and revenue warning issued last week by its main processor rival, Advanced Micro Devices. AMD has more expensive manufacturing processes along with an older product line and had complained of lower selling prices.
Intel shares fell 4 per cent in after-hours trading to $21.40 as it predicted little recovery in gross margins this year, despite its new high-end product line. It forecast gross margins, which had fallen below 50 per cent in the second half, to be around 49 per cent for the first quarter and 50 per cent for the year.
Andy Bryant, chief financial officer, blamed competition with AMD and costs associated with moving to the next level of miniaturisation. He said there would be a two-point margin deterioration caused by the high cost of starting up Intel’s manufacturing process for chips with 45-nanometre-width circuitry in 2007.
Intel announced fourth-quarter revenues of $9.7bn, down 5 per cent on a year earlier, but up 11 per cent on the third quarter, when it predicted sales in the range of $9.1bn to $9.7bn for the final quarter. Analysts polled by Reuters Estimates expected sales of $9.4bn on average and earnings per share of 25 cents.
Intel reported profits of $1.5bn or 26 cents per share. The results included a gain from the sale of its cell-phone processor business and impairment and restructuring charges that added up to a net increase in earnings per share of one cent.
Intel achieved a stronger second half after it introduced processors featuring two and then four brains or cores, based on its first new architecture in five years. It also shipped more than 70m microprocessors in 2006 based on smaller, more cost-effective 65-nanometre circuitry – around a year ahead of AMD’s full switchover to 65nm.
Nevertheless, 2006 was a tough year for Intel as it lost market share to AMD, began a restructuring programme and cut prices to clear out old inventory. After three years of double-digit revenue and earnings growth, Intel reported revenues fell 9 per cent in 2006 to $35.4bn, while earnings per share plunged 39 per cent to 86 cents from $1.40.
It ended the year with a global workforce of 94,100, down from 102,500 in the second quarter.
“2006 was a challenging year,” Paul Otellini, chief executive, told analysts on a conference call.
“In 2007, we will continue to drive technology including quad-core and 45 nanometre, while further increasing our operational efficiencies across the company.”