Intel on Tuesday posted quarterly results and an outlook behind Wall Street targets, sending its shares down 15 percent, further stoking concerns the U.S. economy may be entering a recession.
Chief Financial Officer Stacy Smith said he was a little bit cautious on the state of the U.S. economy, and the results raised concerns about the impact the economy was already having on the world's largest chipmaker.
Intel touches so many names and it's also global, so it should have an impact on the market to the down side, said Bennett Gaeger, managing director at Stifel Nicolaus.
Intel microprocessors are the computing engines of about 80 percent of the world's personal computers and it's making a big push this year to get more of its chips designed into consumer electronics gizmos such as set-top boxes.
If the after-hours percentage drop in its shares carries through into regular-hours trading on Wednesday, it would be the biggest one-day drop in Intel's stock since October 2002.
Net income in its holiday-sales-fueled fourth quarter rose to $2.27 billion, or 38 cents per share, from $1.50 billion, or 26 cents per share, a year ago. Revenue advanced 10.5 percent to $10.7 billion from $9.69 billion.
Analysts had expected a profit before items of 40 cents per share, on average, on revenue of $10.8 billion, according to Reuters Estimates. Intel had previously said to expect fourth-quarter revenue of $10.5 billion to $11.1 billion.
The company's competitive positioning is as strong as it's been in recent years so I would attribute any of the weakness to a macro slowdown, CRT Capital Group analyst Ashok Kumar said, noting the midpoint of Intel's guidance implies a sequential revenue decline of about 10 percent -- more than the mid- to high-single-digit percentage fall seen historically.
It's not that demand is falling off a cliff, we're just seeing a little more weakness than normal seasonal patterns.
For the current quarter, Intel expects revenue of $9.4 billion to $10.0 billion and a gross margin of 56 percent, plus or minus a couple of points. Analysts had expected first-quarter revenue of $10.0 billion.
I'm disappointed on the top-line revenue outlook number, said Doug Freedman, analyst with American Technology Research. I'm also disappointed on the expense controls.
In the just-reported quarter, Intel had a gross margin of 58 percent, compared with its forecast of 57 percent.
CFO Smith said in a phone interview that demand throughout the fourth quarter was strong, and that Intel saw no sign of a U.S. recession during the quarter, but added: We're a little bit cautious based on what we see in the U.S. economy.
Former Federal Reserve Chairman Alan Greenspan told the Wall Street Journal on Tuesday the economy was probably in or about to enter a recession.
Tuesday's setback marks a momentum shift for Intel. After underperforming the competition in 2005 and 2006, it had turned the tables on rival Advanced Micro Devices Inc and regained market share, particularly in the market for computer servers, which carry higher profit margins than desktop PCs.
Shares of Intel had been trading at about 3.2 times its forecast 2008 revenue, compared with about 0.5 times for AMD, as that company has struggled with market share losses to Intel and production delays of a key server processor.
Intel shares fell to $19.38 in after-hours trade from a Nasdaq close of $22.69. Based on Monday's close, Intel shares had already declined nearly 18 percent so far this year, versus an 11 percent decline in the Philadelphia Semiconductor Index.
(Editing by Braden Reddall)