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Shipment patterns returning to normal, in a sign the recession may be close to an end for Intel

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.


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Expensive industry.
By Regs on 4/15/2009 8:58:15 AM , Rating: 3
$7.1 billion and a 600+ million in actual profit. Sheesh. That is one hungry giant.

RE: Expensive industry.
By B166ER on 4/15/2009 9:19:17 AM , Rating: 2
Times is hard, dawg. Plus They are down 55% from last year, so you're looking at, if things get back up like last year, which ain't anytime soon, a good 1.4 billion in profits. The 7.1 billion includes restructuring and underutil costs, should be lower next quater, Maybe....

RE: Expensive industry.
By quiksilvr on 4/16/2009 1:52:09 PM , Rating: 2
I think that was the first time I've seen the word "dawg" used on a DailyTech comment.

RE: Expensive industry.
By RamarC on 4/15/2009 12:37:45 PM , Rating: 5
Love 'em or hate 'em, Intel is a stellar corporation. They control costs, they anticipate supply/demand, they refresh their product line regularly, they invest in infrastructure and research&development, they have manufacturing presence in the US and globally, and they make a boatload of money even in a recession.

RE: Expensive industry.
By FaceMaster on 4/19/2009 7:26:01 PM , Rating: 1
Love 'em or hate 'em, Intel is a stellar corporation.

and with out them we wouldn't be able to run Crysis.

RE: Expensive industry.
By Regs on 4/20/2009 4:00:38 PM , Rating: 2
They also hold a patent on x86 :|=

By luceri on 4/15/2009 11:06:47 AM , Rating: 3
Core 2 was huge, so it's to be expected that they're down from last year as they were still reaping the rewards of an insane processor at an insane price back then. Nehalem just doesn't give that performance jump, plus it's a much more expensive platform. Couple that with the fact that 99% of individuals don't actually need more power than the core 2's, they're just not selling well. They need nehalem to be a cheaper platform.

The core 2 market is mostly saturated, the people that wanted one by now have one, so they're just not selling anymore like they used to. I think this would be the same even in a good economy. Nehalem is better sure but for the reasons stated above, it's not going to do what core 2 did sales-wise. Sales should pick up for the school year coming up, but aside from that I don't see anything big happening until Westmere's successor (Westmere being the 32nm shrink of nehalem), Sandy Bridge. This provided Sandy Bridge still uses ddr3 and motherboards which should be cheap by then.

Just my opinion.

By Lifted on 4/15/2009 12:32:48 PM , Rating: 2
I think it's safe to assume that the most people out there have no idea how much faster current CPU's are than their years old Core 2. Hell, Most people think the monitor or case is the "CPU" and have no idea what a Core 2 is.

People and organizations replace computers when they are too slow, out of warranty, breaking down, or can't run newer hardware or software they want/need. Only enthusiasts, gamers, and high end workstation users (photo editing, video production, CAD/CAM, etc) worry about the speed of the CPU when deciding to upgrade or replace a system.

By Major HooHaa on 4/17/2009 10:22:32 AM , Rating: 2
From what I have read, the Nehalem will give a big performance boost to large servers, with its 8 threads per processor and integrated memory controller.

Who's Bottom?...
By ClownPuncher on 4/15/2009 2:21:46 PM , Rating: 4
Who's bottom has been reached, and can we sue for sexual harrassment?

cut your prices!
By nirvanaman on 4/15/2009 12:36:44 PM , Rating: 1
if they wanna make more profit they need to cut core i7 cpu prices and x58 chipset prices, just too expensive, been out for 6 months already, will be 12months by the time core i5 is out and 0 price cuts so far on the boards or cpu's. They would sell far more if the cut the prices by 30%, im sure they would make more profit doing this.

RE: cut your prices!
By Pryde on 4/16/2009 12:55:14 AM , Rating: 2
It wouldn't make sense, the lower priced Core 2 are still the main selling product and are most likely far more profitable than i7.

I have to admit...
By diego10arg on 4/15/2009 10:23:31 AM , Rating: 2
Modern economic theory states that a recession is over when inventories are depleted and a bottom is reached.

I love that phrase.

Not yet....
By crystal clear on 4/18/2009 4:26:06 AM , Rating: 2
Shipment patterns returning to normal, in a sign the recession may be close to an end for Intel

"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.

Indeed a very optimistic statements/outlook but thats not the end of the recession even for Intel.

On reading their business outlook in their financial statements,you find this-

Q2 2009:

Due to continued economic uncertainty and limited visibility, Intel is not providing a revenue outlook at this time. For internal purposes, the company is currently planning for revenue approximately flat to the first quarter.

and this-

Current uncertainty in global economic conditions pose a risk to the overall economy as consumers and businesses may defer purchases in response to tighter credit and negative financial news, which could negatively affect product demand and other related matters. Consequently, demand could be different from Intel's expectations due to factors including changes in business and economic conditions, including conditions in the credit market that could affect consumer confidence; customer acceptance of Intel's and competitors' products; changes in customer order patterns including order cancellations; and changes in the level of inventory at customers.

In short its too early to conclude that the recession is on its way out-also for Intel.

The road to an economic recovery is a long & a painful one.

Intel's 1Q 2010 results will give the real economic indicators if a full fledged recovery is taking place.

Not even close to bottomed...
By Beenthere on 4/15/09, Rating: -1
By Chocobollz on 4/16/2009 7:22:59 AM , Rating: 1
I would say, if they're really hungry, they'll need more than chips, they need pizza!

P.S. J/k

By FaceMaster on 4/19/09, Rating: -1
"If they're going to pirate somebody, we want it to be us rather than somebody else." -- Microsoft Business Group President Jeff Raikes

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