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Intel Earnings Fall as PC Sales Remain Weak

Intelreported earnings that fell precipitously from last year but matched Wall Street forecasts, the chip maker tempered its outlook for the current quarter.

Intel's headquarters in Santa Clara, California.
Paul Sakuma
Intel's headquarters in Santa Clara, California.

Intel was hurt by a huge writedown and wheezing PC sales that have crimped demand for microprocessors.

Intel, the world's biggest maker of semiconductors, said it earned 4 cents a share in the fourth quarter on a topline of $8.2 billion. That compares with a profit of 38 cents a share on sales of $10.71 billion last year.

The company was expected to earn four cents a share on revenue of $8.214 billion, according to a consensus estimate from analysts who follow the company.

Intel had already said its fourth-quarter revenue was $8.2 billion, about $2 billion short of its initial estimates.

The Santa Clara, Calif.-based company's profits are being squeezed by a freeze in information-technology spending and a shift toward low-margin processors for a class of little laptops known as "netbooks." A big reason for the severity of the fourth-quarter drop, though, was a $1 billion writedown of the value of Intel's investment in Internet provider Clearwire .

Video: CNBC's Jim Goldman discusses Intel's earnings announcement with CFO Stacy Smith.

Clearwire specializes in a new type of wireless broadband technology called WiMax that Intel is building into its chips, and has stumbled on fears the credit crunch will derail its ambitious network buildout plans.

Intel's sales were $8.2 billion, a 23 percent shortfall from last year. Intel blunted the shock of the big declines by lowering its guidance twice.

For all of 2008, Intel earned $5.3 billion, 24 percent lower than a year ago, on sales of $37.6 billion, a 2 percent decline.

Intel said it's planning for around $7 billion in first-quarter sales, which is almost $300 million lower than analyst estimates.

But the company cautioned the number is a rough estimate, and that it won't provide a specific forecast yet because the financial crisis has seriously clouded the company's visibility about its future finances.

  • Get After-Hour Quotes for Intel
  • Gross profit margin will slip dramatically from 53.1 percent of sales in the fourth quarter, to the low-40-percent-range in the first quarter. Intel is incurring big expenses for running factories that aren't at full throttle because of weaker demand.

    Shares of Intel rose about 1.5 percent in extended trading after finishing the regular session at $13.29, a rise of 1.61 percent.

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