Intel Corporation has announced results for the first quarter of its 2009 fiscal year. Revenue was $7.1 billion, down 26% from 2008. Its net profit for the quarter was $647 million, down 55% from last year. The primary reason for the sales and profit decline was factory underutilization charges, due to Intel cutting back on production and closing fabs on account of the global economic recession. Restructuring and asset impairment charges were $74 million, lower than the firm's expectation of $160 million.
However, the bright spot for Intel was that inventory levels were lowered in March, with some customers requesting delivery of some CPUs ahead of schedule. Inventories were reduced by approximately $700 million in the first quarter. Modern economic theory states that a recession is over when inventories are depleted and a bottom is reached. Companies like Intel will have to increase production to meet demand and the recovery phase of the economic cycle can begin.
Intel executives stated in a financial briefing that "shipment patterns were starting to return to normal". Q1 results were better than they had expected, and they believe Q2 to mirror Q1, with a minor uptick towards the end.
The corporation also stated they were on track to reduce 2009 operational spending from 2008. Intel laid off 1400 staff in Q1, but it still has over 82,500 personnel employed around the world.
The loss from equity investments and interest was approximately $18 million, lower than the expectation of a $130-million loss. This was primarily due to a strengthening market for debt instruments at the end of the quarter.
Even netbooks sales took a hit, with average selling prices and gross margins down as a result. Revenue from Atom microprocessors and chipsets was $219 million, down 27 percent sequentially. Excluding shipments of Intel Atom microprocessors, the ASP was approximately flat sequentially.
Gross margin of 45.6 percent was lower than 53.1 percent in the fourth quarter. Consumer sales aren't too much of a worry, but the corporate server and workstation market is of big concern to Intel, as those are areas of high profitability.
The world's largest CPU maker is hoping that firms will start upgrading to its new Nehalem-based Xeon processors due to their reduced TCO (Total Cost of Ownership). The 5500 series offers a payback period as low as eight months, due to higher levels of energy efficiency, which can reduce electricity, cooling, and physical storage space required in a datacenter.
Intel expects the one millionth processor based on Nehalem technology to ship this week. It stated that Nehalem-based products will have "premium pricing profile for a while", in a blow to upgraders waiting for a Core i7 price cut. However, the Core i5 mass market version of the Nehalem family will arrive in Q3 this year, with the first 32nm Westmere-based CPUs still on track for the fourth quarter.
quote: Love 'em or hate 'em, Intel is a stellar corporation.
quote: Modern economic theory states that a recession is over when inventories are depleted and a bottom is reached.
quote: Shipment patterns returning to normal, in a sign the recession may be close to an end for Intel
quote: "We believe PC sales bottomed out during the first quarter and that the industry is returning to normal seasonal patterns," said Paul Otellini, Intel president and CEO.
quote: Intel's Q1 Profits Down 56%
quote: down 55% from last year.