Intel revenue drops on weak economy, poor sales

Intel Tuesday said its revenue and profit dropped during the third quarter of fiscal 2012 compared to the same period a year earlier, and blamed a tough economy for poor sales of its products.

The company's profit was $2.97 billion for the quarter ending Sept. 29, dropping from $3.47 billion reported in the same quarter last year. The company reported earnings per share of $0.58, or $0.60 excluding one-time items. Analysts polled by Thomson Financial expected EPS of $0.49.

"Our third-quarter results reflected a continuing tough economic environment," said Intel CEO Paul Otellini in a statement.

Intel's revenue was $13.5 billion during the third quarter, dropping from the $14.2 billion in the same quarter last year. Analysts expected revenue of $13.2 billion.

Chip makers are struggling as the PC market slumps. Advanced Micro Devices last week cut its revenue forecast for the third quarter, saying a weak economy was hurting demand for its products. Intel in September shaved close to $1 billion off its third revenue expectations from its previous outlook in anticipation of weak demand for its products. Intel previously said third-quarter revenue would be between $13.8 billion and $14.8 billion, but lowered it to between $12.9 billion and $13.5 billion.

The PC market is in a decline, with research firm IDC last week saying that worldwide PC shipments in the third quarter dropped by 8.6 percent compared to the same quarter a year earlier. However, analysts have said that the PC market could start recovering by the end of the fourth quarter after shipments of Windows 8 PCs pick up.

Revenue from Intel's PC Client Group, which deals in PC chips, was $8.6 billion, down 8 percent compared to the same quarter last year. However, a bright spot was the Data Center Group, which deals in server chips and recorded revenue of $2.7 billion, increasing by 6 percent year-over-year.

Windows 8 arrives Oct. 26

windows 8

PC makers are clearing off inventory of old Windows 7 PCs ahead of the launch of Microsoft's new OS, Windows 8. New PCs with Intel's Core processors code-named Ivy Bridge will become available starting on Oct. 26, and top PC makers Hewlett-Packard and Lenovo are expected to ship tablet with the low-power Atom processor code-named Clover Trail.

"As we look to the fourth quarter, we're pleased with the continued progress in Ultrabooks and phones and excited about the range of Intel-based tablets coming to market," Otellini said.

Intel is still making its way into the smartphone market, but scored a big win with Motorola, which announced an Intel-based smartphone in September.

For the fourth quarter, Intel is expecting revenue to be $13.6 billion, plus or minus $500 million. In written commentary, Intel's chief financial officer Stacy Smith said the outlook was cautious and takes into account concerns about a slowing enterprise market segment and soft demand for products in consumer and mature markets.

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