Intel Profit, Sales Fall Short; Shares Plunge After Hours

Intel posted fourth-quarter results and a first-quarter outlook behind Wall Street targets, sending its shares down about 15 percent.

Exterior view of Intel headquarters in Santa Clara, California.
Paul Sakuma
Exterior view of Intel headquarters in Santa Clara, California.

Net income in Intel's holiday-sales-fueled fourth quarter rose to $2.27 billion, or 38 cents per share, from $1.50 billion, or 26 cents per share, a year ago. Revenue advanced 10.5 percent to $10.7 billion from $9.69 billion.

Analysts saw the leading chip maker for PCs and Apple computers earning 40 cents a share on revenue of $10.84 billion in the fourth quarter, according to a consensus estimate compiled by Thomson Financial.

The company also gave guidance that was short estimates. For the current quarter, Intel said it expects revenue of $9.4 billion to $10.0 billion and a gross margin of 56 percent, plus or minus a couple of points. Analysts expect first-quarter revenue of $10.0 billion. In the just-reported quarter, Intel had a gross margin of 58 percent, compared with its forecast of 57 percent.

Shares of Intel plunged almost 15 percent in extended trading Tuesday, after finishing regular market hours down 1.69 percent at $23.69.

"It caught a lot of people by surprise...It looks like a miss, and the guidance was not as strong as we'd like," said Bennett Gaeger, managing director at Stifel Nicolaus. "Intel touches so many names and it's also global, so it should have an impact on the market to the down side. But how much of this is baked in?"

Intel shares hit a 52-week high of $27.99 in early December, but they finished the fourth quarter up only about 2 percent at $26.66.

Intel also said it expects to see capital expenditures of $5.2 billion in 2008.

After stumbling in 2005 and 2006, Intel turned the tables on its main rival Advanced Micro Devicesand has regained market share, particularly in the market for computer servers, which carry higher profit margins than desktop PCs.

Cautious on First Quarter

Intel did not see any signs of a slowdown in the fourth quarter but is somewhat cautious going into the first quarter, the chipmaker's CFO told CNBC's Jim Goldman.

"We'd be crazy not to be concerned about what we're seeing based on economic indicators. however we didn't see a slowdown in our computing business as we went through the fourth quarter," Chief Financial Officer Stacy Smith said. "We're not predicting a slowdown in the business as we go into Q1 in total. We're forecasting 10 percent year over year revenue growth. You should characterize this as a little caution as we start the year, but the business grew nicely."

When asked about the impact of this earnings report on Intel's share price, Smith reiterated that going into the first quarter, Intel had a strong product portfolio and was seeing great potential in the 45 millimeter process transition.

"This not only brings us speed and cost benefits, but also givesus a power efficient architecture which opens up growth opportunities in the future ... You also have to keep in mind that the U.S. is a relatively small percentage of our total business ... probably less than 25 percent of the total business," Smith added.

Shares of Intel trade at about 3.2 times its forecasted 2008 revenue, compared with 0.47 times for AMD, as that company struggles with market share losses to Intel and production delays of a key server processor.

Intel's latest-generation processor chips are at least six months ahead of AMD , according to analysts.

-- Reuters contributed to this report.