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Slow desktop chip sales hit Intel

Stock plunges, but Apple to the rescue

Intel revenue came in below the company's own updated forecast for its 2005 fiscal fourth quarter, due to desktop processor unit shipments that were lower than expected, the company said yesterday.

Intel announced revenue of US$10.2bn for the quarter that ended 31 December 2005, missing company expectations of between $10.4bn and $10.6bn that it announced in December. Still, revenue was up from the $9.6bn reported in the year-earlier quarter.

Intel's net income for the quarter was $2.5bn, up from the year-earlier quarter, when it reported net income of $2.1bn. However, earnings per share were 40¢, missing by 3¢ per share an analyst consensus estimate from Thomson First Call.

Intel also filed its year-end results yesterday. The company reported revenue of US$38.8bn for the year, a 13.5 percent increase from revenue of $34.2bn reported for fiscal 2004. Net income for the year was $8.7bn, a 15 percent increase over net income of $7.5bn for 2004.

Following the announcement, Intel's stock price plunged more than 8 per cent in after-hours trading.

For the 2006 first quarter that is currently in progress, Intel expects revenue to be between $9.1bn and $9.7bn. For fiscal 2006, the company expects revenue to be 6 percent to 9 percent higher than the full-year figure for 2005.

Inventory problems
On a conference call yesterday, Intel executives attributed the lower than expected shipments of processors to inventory problems. More specifically, Intel did not have the inventory to meet demand for desktop chips, so it did not ship as many processors as the company had expected, executives said.

"We’re starting out in a bit more of a hole for 2006 then we first had thought," Intel CEO and President Paul Otellini acknowledged.

He said inventory levels are returning to normal, as Intel has been and expects to continue increasing chip inventory in the first quarter. Intel will focus on stabilising inventory levels for the rest of the year following these first-quarter efforts.

Apple to the rescue
The recent release of Apple computers built on Intel chips also should increase shipments of Intel processors in the current quarter over the fourth quarter of 2004, Otellini added.

Intel's revenue results varied according to global geographic regions. The company reported $5.1bn in revenue in Asia-Pacific, a year-over-year increase of 16 percent. In Japan, which the company breaks out separately, the company posted revenue of $945m, an increase of 11 percent year-over-year. Revenue for Europe, however, was flat year over year at $2.3bn.


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