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Economic Fog Lifts a Bit On PC Chip Biz

Santa Clara, Calif. – There could be some light at the end of the tunnel, with revenue and profit at chipmaker Intel beating analysts’ forecasts in the fourth quarter.

At the same time, smaller rival Advanced Micro Devices (AMD) posted a smaller fourth quarter loss and greater revenue than Wall Street had expected.

However, even with a rise in personal computer sales over the past holiday period, the PC business – still hampered by a stalled economy and lack of demand – is expected to remain slow in the first quarter.

Following what has been called the worst recession year the PC industry has ever endured, Intel reported fourth-quarter revenue of $7 billion, a 7 percent increase over the same three months in 2000. Net income, including acquisition costs, however, slid 77 percent to $504 million, compared with $2.2 billion in the year-ago fourth quarter.

‘2001 was a terrible year for our industry,’ said Craig R. Barrett, president/CEO. ‘While 2001 was difficult for Intel, I can’t imagine changing places with any other company on the planet.’

Over the year, ending Dec. 29, Intel revenue was off 21 percent, hitting $26.5 billion, compared with $33.7 billion in 2000. Net income, including acquisition costs was down 88 percent, dropping to $1.3 billion, compared with $10.5 billion in 2000.

Intel’s first-quarter sales predictions for 2002 remain bearish, with the company expecting revenue of between $6.4 billion and $7 billion during the three months. This implies revenue will remain flat or fall by as much as over 8 percent from the fourth quarter.

Intel, like other high-tech manufacturers, has been feeling the effects of the economic downturn for over a year. However, unlike its industry brethren, many of which have resorted to massive layoffs, Intel has weathered the sales storm by continuing to contain its costs. This first quarter is no exception, with the company stating it will reduce its capital spending by 25 percent, reducing this to $5.5 billion, compared with $7.3 billion in 2001.

Led by record unit and dollar sales of PC chips, AMD reported that PC processor revenue surged more than 50 percent sequentially and that the company sold a record 7.8 million PC processor units in the fourth quarter ended Dec. 30.

However, fourth-quarter revenue dipped 19 percent to $952 million, down from $1.2 billion in the same quarter in 2000. AMD lost $15.8 million in the fourth quarter, compared with a profit of $178 million in the year-ago three months. ‘In a very difficult year for the industry that saw worldwide sales of semiconductors decline by more than 31 percent, AMD sales declined by about half that amount,’ said W.J. Sanders III, chairman/CEO, in supporting his company’s past 12 months.

For the full year, AMD reported net sales of $3.9 billion, down 16 percent from the $4.6 billion recorded in 2000. Net income plunged to $28.9 million in 2001, compared with $793.8 million the previous 12 months. When the effects of restructuring and other charges are added the year’s loss climbs to $60.6 million.

AMD expects PC processor unit shipments in the first quarter of 2002 to remain at or near the record level of 7.8 million units, with average selling prices at or near the $90 level of the fourth quarter of 2001. The company expects a sequential revenue decline in the first quarter to about $900 million, which would result in a small net loss. However, AMD remains on track to return to profitability in the second quarter and to achieve solid profitability for the year as a whole.