Intel profits down despite record sales

INTEL, the world’s biggest computer-chip maker, said fourth-quarter profits fell after the company slowed factories to work off inventory.

Sales rose to a record, boosted by holiday-season demand for laptops.

Net income dropped to E1.6 billion or 25 cent a share, from E1.65bn a year earlier, Santa Clara, California-based Intel said yesterday.

Sales rose to E 7.3bn, exceeding Intel’s forecast.

Revenue this quarter may exceed analysts’ estimates. Chief executive Craig Barrett overestimated demand for personal computer chips last year, forcing him to cut production to trim a record stockpile of unsold products.

Holiday laptop demand propped up sales last quarter, helping Mr Barrett turn around a year where results had been hurt by product delays and inventory.

“It’s the multimedia experience, being able to take it on the road and watch DVDs, having music, taking it with you”, Patrick Becker Jnr, of Becker Capital Management in Portland, Oregon said before the report.

Laptops are “an area that has seen nice growth.” Sales this quarter will be E6.7bn to E 7.2bn Intel said. Analysts expected E6.8bn. Intel had forecast sales of E 7.1bn to E 7.24bn in the fourth quarter and had E 6.66bn in fourth-quarter revenue a year earlier.

Intel shares fell 34 cents to $22.54 at 4pm New York time in Nasdaq stock market composite trading. They gained 17% in the fourth quarter.

The company’s semiconductors, microprocessors that work as the engine in computers, power more than 80% of the world’s PCs.

Intel is the first major computer-related company to give results after the year-end holiday shopping season, making the chipmaker a barometer for technology spending.

Sales of notebook computers rose 26% in US retail stores during the Christmas shopping season of November through December.

Analysts expected fourth-quarter profit of 31 cents a share and first-quarter profit of 28 cents.

Intel postponed or cancelled five products in 2004. The company scrapped the next version of its best-selling Pentium chip in October and recalled some of the Grantsdale chipsets that help the processors work with other parts of a PC in June.

Meanwhile Advanced Micro Devices (AMD) said operating profit declined in the fourth quarter as sales of flash memory chips used in mobile phones fell.

STMicroelectronics NV, Europe’s largest chipmaker, said its profitability fell short of estimates in the quarter.