Intel Corp dropped both candy and coal in the industry’s stocking yesterday, when it raised the floor on its fourth quarter revenues forecast but followed up with a $600m write-off in its wireless business.
The silicon giant said it was making the fourth quarter write-off because its expectations for long-term growth at the Wireless Communications and Computing Group are no longer as high as previously expected.
By comparison, the vendor’s Intel Architecture Group, which sells its microprocessor products, is showing solid seasonal growth, and its networking products business is meeting expectations.
Intel originally forecast fourth quarter revenue of $8.1bn to $8.7bn. Yesterday it narrowed that forecast to $8.5bn to $8.7bn. Gross margin should be 62%, plus or minus a percentage point, compared to earlier forecasts of 60% plus or minus a couple of points.
As well as narrowing revenue forecasts in the right direction, the vendor had other treats for the industry. CFO Andy Bryant said IAG was showing general strength across all parts of its business. He added that the European market was operating according to seasonal norms.
However, Bryant admitted the situation at the wireless arm threw a damper on the company’s performance as a whole. The group had been late to market with some products, he said, and had been further hit because of the delay in uptake of more sophisticated phone handsets.
Bryant said the impairment amounted to substantially all of the goodwill in the wireless business. The business is built around the DSP Communications Inc business the vendor took over in 1999.
Despite throwing a substantial amount of muscle and money at the networking and wireless markets, Intel still looks to IAG for pretty much all of its profits.
Bryant said that while the networking business has grown as expected over the last year, the wireless business growth rates had been worse than expected.
The networking business was also built in part on acquisitions, but Bryant said there was no pressure to consider write-offs in that unit as it was performing to plan.
This article is based on material originally produced by ComputerWire.