Intel earnings plunge on soft chip sales

Reeling from recent layoffs and a slowdown in the growth of worldwide PC sales, Intel on Wednesday posted profits of $885 million for the second quarter, less than half of the $2 billion it earned in the same period last year.

Intel, of Santa Clara, Calif., listed earnings of 15 cents per share on revenue of $8 billion for the quarter ending July 1, down from 33 cents per share on revenue of $9.2 billion for the same time last year.

The report beat a forecast of 13 cents per share from analysts surveyed by Thomson Financial, but fell short of their $8.3 billion revenue forecast.

The losses came from poor performance across the board, as the company cited decreases in the number of microprocessors sold, their average selling price, and the number of motherboards sold.

The sole bright spot was a rise in the number of flash memory units sold, but that was not enough to rescue Intel from sinking revenues around the globe.

Year over year, Intel counted an 8 percent drop in revenue from the Americas, 14 percent drop in Asia-Pacific, and 24 percent drop in Europe. Only Japan—the smallest market—was positive with a 3 percent rise.

Intel is in the midst of a corporate reorganization, begun in April when CEO Paul Otellini predicted the company’s annual profit would reach just $9.3 billion for 2006, down from $12.1 billion in 2005.

Otellini blamed a slump in the growth rate of PC sales, excess inventory of microprocessors at retailers and a loss of market share to competitor Advanced Micro Devices. Since then, the company has announced July 13 it would lay off 1,000 managers, and has sold its XScale smartphone processor unit for $600 million.

Those troubles are likely to continue. On Wednesday, the company forecast revenue of $8.3 to $8.9 billion for the third quarter, lower than analyst estimates of $9.1 billion.

Intel supplies Core Duo processor to Apple to power that computer maker’s iMac, Mac mini, MacBook, and MacBook Pro product lines.

This story, "Intel earnings plunge on soft chip sales" was originally published by PCWorld.

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