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Intel: Fourth quarter falls short of estimates; outlook light

Update: I'm listening to this Intel earnings conference call and it's hard to justify the pessimism with what management is actually saying. I'll have more tomorrow after I mull this over.
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Written by Larry Dignan on

Update: I'm listening to this Intel earnings conference call and it's hard to justify the pessimism with what management is actually saying. I'll have more tomorrow after I mull this over. But Intel isn't saying the sky is falling--far from it. Then again, 75 percent of Intel's revenue is international so maybe it's insulated from the U.S. malaise.

Original post begin:

Remember those worries about Intel's quarter? They were justified.

The company on Tuesday reported fourth quarter earnings of $2.3 billion, or 38 cents a share, on revenue of $10.7 billion. That tally fell short of Wall Street estimates. Wall Street was expecting Intel earnings of 40 cents a share for the fourth quarter on sales of $10.8 billion, according to Thomson Financial.

Intel did note that the fourth quarter included a restructuring charge that cut earnings by 2.5 cents. If you exclude that charge, Intel appears to be in line with earnings estimates.

But the outlook was the big item--and Intel's range looks light. Intel shares were hammered after hours.

Intel projected revenue between $9.4 billion and $10 billion, which is a bit light in terms of range considering analysts were expecting revenue of $9.98 billion.

In a statement, Intel CEO Paul Otellini said the company has the best combination of products, technology and manufacturing skills in its history. Unfortunately, the demand doesn't appear to be there yet.

By the numbers:

  • Intel reported 2007 net income of $7 billion, or $1.18 a share, on revenue of $38.3 billion, up 8 percent from a year ago.
  • Fourth quarter gross margin was 58.1 percent, up 6.9 points from the third quarter due to higher volume and lower costs.
  • ASPs were flat and semiconductor units were at record levels.
  • The company sees R&D spending between $2.8 billion and $2.9 billion in the first quarter. For 2008, R&D spending will total about $5.9 billion.
  • Gross margin for the first quarter will be about 56 percent. For 2008 Intel said gross margin will be about 57 percent.
  • For 2008, Intel sees capital spending of about $5.2 billion.
  • The company ended 2007 with 86,300 employees.

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