Even Giant Intel Succumbs

Posted by Kris | Friday, November 14, 2008 | | 0 comments »

CEO Paul Ottelini is not showing the happy face.

This is the 1st time in the last 20 years of Intel history that the Q4 earnings projection is expected to be lower than Q3 .(Q3 supposedly is the weakest quarter for any tech company with Q1 & Q4 being the strongest). With roughly USD15 Bln in CASH, this company is predicted to be able to last through the storm. 

The company is thrifty in a way that even Otellini's annual salary is not ridiculously high compared to other Wall Street CEOs. Steve Job of APPLE Inc is another CEO whose salary is quite low but he is well compensated since he is also one of the largest shareholder of APPLE. If you search any financial database, his pay is a mere USD1 per annum!!

Soon after Otellini announced the earning warning yesterday, the stock dropped to a low of USD12.55 after normal trading hours, a level not seen before in 7-8 years even during the aftermath of 11 Sept 2001.

Volume was light yesterday before the announcement, with the stock on a short rally upwards and then turning down like a rainbow arch. Today the volume is higher and most likely a repeat of yesterday.

End note: If this giant falls to less than USD10 just because of the effects of recession and not some financial cash flow problem, then this stock is a buy for the long term. Long term meaning around 5-7 years until the next bull market as tech stocks always lags in a bull market. It took some time before Intel rally of to near USD28 ish during the 2006-2008 super rally. It only begin around ~2007 , if i am not mistaken.

The coming recession will be the chance for INTEL to squeeze its only rival AMD to pulp by engaging in another "strategical" price war. The last price war did not benefit both parties. You just need to know the right and "lawful" way to squeeze them..*wink* *wink*

100% going to "BUY" if it falls to less than USD10. Besides the dividend yield is around 3%

Nevertheless, this is not a good sign historically, as this shows that this recession going to be very very painful. Ironically, the number 20 is nearing 21 (7 x 3) which coincides with the Joseph cycle.(Book review)

"This is the 1st time in the last 20 years of Intel history that the Q4 earnings projection is expected to be lower than Q3"

Intel slashes 4Q outlook in sign of severity of economy's squeeze on tech

SAN FRANCISCO (AP) -- Intel Corp.'s deep cuts to its fourth-quarter guidance offers further evidence that technology companies are in for a beating because of the economy.

The Santa Clara-based company slashed more than $1 billion from its sales forecast and dialed its profit expectations way back. Intel, the world's biggest maker of PC microprocessors with 80 percent of the global market, blamed a clampdown on spending for reducing demand for its chips.

ntel doesn't report its fourth-quarter results until January. Its early acknowledgment is a sign that business conditions are so bad the company needed to make major revisions to its financial models.

Intel now expects sales of $9 billion in the last three months of the year, plus or minus $300 million. It previously expected sales between $10.1 billion and $10.9 billion, and analysts polled by Thomson Reuters were looking for $10.3 billion.

Intel blamed "significantly weaker than expected demand in all geographies and market segments" and PC makers buying fewer new chips as they burn through existing inventory to save money.

Intel's profit is being hurt badly. The company's closely watched gross profit margin will now come in around 55 percent of revenue, plus or minus a couple of percentage points. The previous guidance was for roughly 59 percent.

Gross margin measures profit on each dollar of revenue once manufacturing costs are stripped out. It's an especially important measurement for chip makers because upgrading and maintaining their factories is hugely expensive.

Intel shares fell 97 cents, or 7.2 percent, to $12.55 in extended trading after the warning was announced. The stock had fallen 41 cents, or 2.9 percent, to $13.52 during the regular trading session.

The shares have lost about half their value since a 52-week high of $27.99, reached last Dec. 6.

Intel had been performing well before the downturn struck. A new manufacturing process that shrinks the size of its chips' circuitry has allowed it to wring healthy profits despite pressure on prices for those chips. One of those pressures has been the rise of so-called "netbooks," which are pint-sized PCs that are cheaper than regular laptops and are used primarily for surfing the Internet.

Intel's $2.01 billion in profit for the third quarter beat Wall Street's expectations. At the time of the earnings release, the company was optimistic about what lay ahead, if fuzzy on details. Intel warned that it would be tough to predict fourth-quarter results but predicted steady profits.