Intel misses earnings estimates, cuts 4,000 jobs

NEWS

Intel reported lower-than-expected quarterly earnings on Tuesday and said it will eliminate about 4,000 jobs this year as the slowdown in technology spending lingers on. The chipmaking giant reported net income of $446m (about £285m), or 7 cents in earnings per share, on revenue of $6.3bn for the quarter ending 30 June. Excluding acquisition charges, earnings came to 9 cents a share and a little more than 10 cents a share excluding all one-time costs, said Andy Bryant, Intel's chief financial officer. "We expect to see a seasonal increase but we have tempered our expectations for the year," he said. "We have yet to see momentum for the economic recovery in our business." While the revenue figure was within lowered projections from the company, analysts expected the company to report earnings of 11 cents a share excluding costs, according to First Call. To cut costs, the company will trim its work force by approximately 4,000 employees in the second half of 2002, many through attrition, the company said. Intel currently employs 83,000. Last year, it cut approximately 6,000 positions. Additionally, it will cut capital spending to between $5bn to $5.2bn. Earlier, the company said it would spend $5.5bn on plants and equipment this year. Gross margin came to 47 percent, but would have been 48.7 percent without the charges to wind down the online division. The company lowered its second-quarter revenue projections in June due to lackluster demand for desktops in Europe and a shift in buying worldwide from Pentium 4 chips to Celerons. Revenue would come in at between $6.2bn to $6.5bn, rather than between $6.4bn to $7bn, it said at the time. "We are lower in Europe than we anticipated. We thought Europe would be a little stronger in the quarter," Bryant said. Additionally, Intel said its gross margins would fall during the quarter. The chipmaker said its second-quarter gross margins would be 49 percent, give or take a few points, compared with its previous expectation of 53 percent. Profits would also be impacted by a $100m charge to wind down its online service division. The PC market appeared to be slightly on the mend in the first part of the year. In April, Intel turned in a first-quarter profit of 15 cents per share, excluding charges, on revenue of $6.8bn, better than expected. Cost cutting measures through more efficient manufacturing were also reaping greater benefits than expected. But subsequently, computer sales began to tumble. US consumer PC sales dropped 22.5 percent, compared to the year before, and May wasn't much better. A resurgence in corporate buying, predicted since 2001, also failed to materialise. Analysts and company executives also began to voice doubts about any potential sales bump for the back-to-school season or the fourth quarter, traditionally the busiest times of the year. In the first week of June, Intel, Apple and AMD all warned of lower-than-expected revenues. AMD then later followed it up with a second warning lowering projections even further. While the company predicted that revenues would grow in the second half of 2002, it gave a conservative estimate. Revenues for the third quarter will come to $6.3bn to $6.9bn, which would represent growth of zero percent to 10 percent. Typically, revenue jumps 10 percent to 12 percent from the second to the third quarter, said Ashok Kumar, an analyst with Piper Jaffray. Cutting the work force may not provide the tonic Intel needs. Consumers are buying cheaper computers, and the company's foray into the communications market is stalled by a prolong downturn in telecommuncations equipment spending. At the same time, the need to invest in capital equipment, while slightly decreasing, remains high. "I'm not sure how much they can fix by cutting people's heads off," said Joe Osha, an analyst at Merrill Lynch. Geographically, sales looked similar to last quarter. Asia-Pacific remained the most active geographic market, accounting for 38 percent of revenue, compared with 31 percent a year ago, while the US declined to 35 percent of revenue from 37 percent a year ago. Sales in Japan and Europe declined. The picture for the different business groups also looked the same. The Intel Architecture Group, which is responsible for making computer processors and chipsets, accounted for most of the revenue, $5.2bn for the quarter, and all of the profits. The communications group and wireless computing groups continued to sustain losses.

See the Finance News Section for the latest financial news in the high-tech sector. Have your say instantly, and see what others have said. Go to the Finance forum. Let the editors know what you think in the Mailroom.

Post your comment

In order to post a comment you need to be registered and logged in.

You can also log in with Facebook. Log in or create your ZDNet UK account below

By signing up for this service, you indicate that you agree to our Terms and Conditions and have read and understood our Privacy Policy. Questions about membership? Find the answers in the Community FAQ

ZDNet UK Live

Don't forget to check out apps like GoodReader or SlideShark either, they're indispensible for people on the go in presentation situations. Best...

2 hours ago by tinycg on Four top iPad apps for people on the move

Well it seems there is something a number of us agree on. Why is the Ubuntu Unity launcher so ugly? I thought perhaps it was something to do with...

7 hours ago by TerryRK on A tale of two distros: Ubuntu and Linux Mint

Duplicate comments are not made intentionally. Its very good to know that now you are keeping check on this problem because sometimes a commenter...

16 hours ago by Freebies202 on Microsoft fixes blog comments, speeds up blogs with open source

"the very significant number of users" and "many (most) of us" - you have no evidence for these statements. It is a fact that most users are saying...

1 day ago by kevinmchapman on A tale of two distros: Ubuntu and Linux Mint

Another grammar faux pas is the improper use of "you". When sitting down down in a restaurant, for example, I get cringe when the waitress...

1 day ago by Marg Menzies Harrison via Facebook on 10 flagrant grammar mistakes that make you look stupid

And NOW, folks, for Canonical's next trick... Kubuntu is late. Here's a pencil. Draw your own conclusions. cf.:...

1 day ago by zdnetukuser on Linux Minterface

@kevinmchapman. The discussion here reflects the very significant number of users who really do like the traditional menu system and who wish to...

1 day ago by Moley on A tale of two distros: Ubuntu and Linux Mint

Er, no... It is an efficient means of finding the application/file/setting you need in one place. The icons are a simply a fallback for when you...

1 day ago by kevinmchapman on A tale of two distros: Ubuntu and Linux Mint

Isn't the provision of a text based search an admission by the developers that the mass of icons approach does not work? I don't need to use a...

1 day ago by TerryRK on A tale of two distros: Ubuntu and Linux Mint

"Unity and GNOME 3 both abandon the old text-based cascading menus in favour of a graphical icon-driven system." Point truly missed. Both use a...

1 day ago by kevinmchapman on A tale of two distros: Ubuntu and Linux Mint

whs001 - Thank you, I'm glad you liked the article. I absolutely agree with you on your first point. I should perhaps have made it clearer that...

1 day ago by TerryRK on A tale of two distros: Ubuntu and Linux Mint

If we allow corporate interest to dictate the way our government circumvents due process against foreign entities then we should accept the same...

1 day ago by Dennis Nilsson via Facebook on ACTA stumbles in Germany

I totally dislike pirating of works, I fear that artists will be deterred from creating works if they think that they are going to get ripped off....

1 day ago by GHar123 on ACTA stumbles in Germany

How dare film makers, artists or anybody that invests in creativity stop us pirating their works for free. I want to be able to walk into my local...

2 days ago by JCB33 on ACTA stumbles in Germany

@GrueMaster. I prefer horses for courses rather than one size fits all. I, and I suspect most other computer users, do not really wish to have...

2 days ago by Moley on A tale of two distros: Ubuntu and Linux Mint

The product that scares me every time I have to use it is the Office 2007 version of Excel. The first bug that I found was applying the median...

2 days ago by greycynic on Ten flawed products that derail productivity

Nice review and very informative. One thing I'd like to add (in reply to whs001's 1st question), the main reason to have the same interface from...

2 days ago by GrueMaster on A tale of two distros: Ubuntu and Linux Mint

I'be been using Mint 12 since the RC came out, and I am far more happy with the Cinnamon, the Mate, and, yes (with extensions), theGnome 3...

2 days ago by Frederick Wrigley via Facebook on A tale of two distros: Ubuntu and Linux Mint

Excellent article. One small correction, though--although a fresh installation of Linux Mint 12 will, indeed, provide the user with a version of...

2 days ago by bdantas on A tale of two distros: Ubuntu and Linux Mint

In related news, the ISPs club together to get the members of the Home Affairs Select Committee (ya goofed on that part, ZDNet UK) copies of "The...

2 days ago by Alan Ralph via Facebook on MPs urge ISPs to take down terrorist material

Featured white papers

Latest jobs

Intel misses earnings estimates, cuts 4,000 jobs

Daily Newsletters

Topics

Related stories

Itanium 2 partners: Ready, steady...wait?

Heart of England NHS begins massive digitisation plan

Hard-drive woes hit PC shipments in fourth quarter

Post your comment

ZDNet UK Live

Latest in IT Strategy

Heart of England NHS begins massive digitisation plan

Hard-drive woes hit PC shipments in fourth quarter

Featured white papers

Latest jobs

PHP Web Developer - html, css, javascript

Java Developer, Online Gaming, London

Quant Dev, Hedge Fund, FX, Excel VBA

Inside ZDNet UK

A tale of two distros: Ubuntu and Linux Mint

2012 Predictions: VCE FastPath, VI SAN Probe & Hadoop

BlackBerry Bold 9790

Make faster, smarter decisions using BI

Ten factors that make Ubuntu 11.10 a hit

Toshiba Portégé Z830-10P Review

BT's archive: Pictures from the vault

News & Analysis

Reviews

Blogs

Resources

About Us

Member Services

Special Features

Advertising Features

ZDNet UK / News and Analysis / Business of IT / IT Strategy

Intel misses earnings estimates, cuts 4,000 jobs

Daily Newsletters

Topics

Related stories

Post your comment

Get ZDNet UK's daily newsletter

Enter your email address to sign up

ZDNet UK Live

Latest in IT Strategy

Featured white papers

Latest jobs

Inside ZDNet UK

Resources

About Us

Member Services

Special Features

Advertising Features