INTC Profit Declines 55% on Falling Chip Demand

http://www.bloomberg.com/apps/news?pid=20601087&sid=aCiBl2JFBSSQ&refer=home

Netbook segment growth hurting Intel badly. Just like everything else, condos replacing homes, apartments replacing condos, store brands replacing brand names, Kia replacing Honda, Infiniti replacing Mercedes.

This guy has it right, but he should have added "you have to feel secure in your job, and if you get a job paying less than your old one..." to his statement:

"You’ve got to have a job to buy a PC,” said Daniel Berenbaum, a New York-based analyst for Auriga USA. “The supply chain came to a halt in January. We’ve cleared out inventory but now we’re building inventory again.”

Intel Profit Declines 55% on Falling Chip Demand

By Ian King

April 14 (Bloomberg) -- Intel Corp., the world’s biggest chipmaker, said first-quarter profit dropped 55 percent because of slowing computer demand and forecast sales won’t recover in the current period.

Net income fell to $647 million, or 11 cents a share, from $1.44 billion, or 25 cents, a year earlier, the company said today in a statement. Intel is planning for sales of about $7.1 billion this quarter, in line with the average analyst estimate in a Bloomberg survey.

Profit plunged for second straight quarter as personal- computer makers cut back chip orders in the industry’s worst slump since 2001. Intel didn’t give a full range of forecasts for a second quarter in a row, fueling concern PC demand may slow further amid the global recession.

“You’ve got to have a job to buy a PC,” said Daniel Berenbaum, a New York-based analyst for Auriga USA. “The supply chain came to a halt in January. We’ve cleared out inventory but now we’re building inventory again.”

Intel, based in Santa Clara, California, fell 54 cents, or 3.4 percent, to $15.47 in extended trading, after closing at $16.01 on the Nasdaq Stock Market. The stock has gained 9.2 percent this year.

Analysts had estimated a profit of 2 cents a share. First- quarter sales fell 26 percent to $7.15 billion.

Sustainable?

While chip orders improved after bottoming in January, some analysts say it’s too early to conclude that PC demand has recovered. After exhausting supplies last year, Intel’s customers may be building up stockpiles.

“The question is more: do we feel this is sustainable?” said Patrick Wang, an analyst at Los Angeles-based Wedbush Morgan Securities, who recommends buying the stock. “It’s been an inventory restocking.”

Intel, whose microprocessors run more than 80 percent of the world’s PCs, kicks off two weeks of earnings reports by technology companies such as International Business Machines Corp., Google Inc. and Microsoft Corp. The widespread use of Intel’s chips in machines ranging from laptops to supercomputers makes its earnings an indicator of industry demand.

PC sales may drop 4.5 percent this year, the first decline since the dot-com slump of 2001, as unemployment increases and companies pare budgets, research firm IDC said last month.

In January, Otellini told employees it was “too close to call” whether the company would be able to maintain its run of 87 consecutive quarters of profitability, causing concern that computer demand had further to fall.

Intel’s sales are picking up partly because of increasing shipments of a new chip called Atom, used in scaled-down laptops called netbooks. Still, that may not help profitability, according to Berenbaum.

“The mix shift to netbooks is not positive for Intel,” he said. “But they have to do it. The market is running away from them.”