The faithful on Wall Street were disappointed yesterday when Intel Corp announced fourth-quarter sales might not rise as much as investors had hoped.
During its mid-quarter update, Intel said revenue would reach $10.4bn to $10.6bn. That may well be the mid-point of its earlier guidance of between $10.2bn and $10.8bn, but analysts had their hearts set on the top end.
Buoyed by overall strength in the global semiconductor market, investors had hoped for an across-the-board improvement. In addition to strong industry numbers, there were a couple of rosy announcements from US cell-phone chipmakers Texas Instruments Inc and Qualcomm Inc this week. TI said demand this quarter would exceed its projections, while Qualcomm pinned sales on the high end of its range.
Seems investors had expected more from Intel, despite the company guiding for a solid fourth quarter. CFO Andy Bryant said several times on a conference call that demand was as Intel had expected.
Intel shares dropped more than 3% in after-hours trading on the Nasdaq yesterday to $24.90 by press time.
Bryant said revenue would grow between 4% and 6% sequentially, or in the bottom end of patterns typical with the fourth quarter. Bryant said that last year at this time, the company forecast 8% to 10% for its fourth quarter.
Part of the problem is excess Intel inventory in the supply chain, or inventory build, which dampens sales somewhat.
Inventory build in the quarter is being worked down, Bryant said.
And the company still faces a chipset shortage, which last quarter put a crimp in overall sales.
I do believe chipsets are still constrained, Bryant said.
Intel has begun to see some benefit from its move this year to bring on third-party chipset contract manufacturers, for the first time, to help meet its demand, he said. But, in general, the constraint in chipsets has certainly limited my chipset revenue, Bryant said, declining to give specifics.
I have been up to keep up with demand in processors pretty effectively, he added.
Bryant said in October that he hopes the chipset supply chain would be resolved by the first quarter of 2006. Yesterday he said it would possibility be later than that and pointed to chipset tightness elsewhere. [The industry’s chipset] tightness will continue well into next year, he said.
Bryant declined to characterize growth in the company’s various product segments, but said there was nothing out of the ordinary among its products or geographic demand. He also said, Right now server orders are tough to win in an end-to-end combat.
Not surprisingly, Bryant said he noticeable revenue in 2006 from its new high-profile OEM partner Apple Computer Inc. He declined to say whether it would be in the first or second half of the year.
Bryant also said the market for flash memory continues to be competitive. But he pointed out that he could have said the same thing at any point during the past two years.
Intel said profit margins would be about 63%, while plant and equipment spending would be below the midpoint of the $5.9bn that it forecast in October, plus or minus $200m.