Big Q4 Not Enough For Intel As Recession Talk Builds

Record quarterly revenues from Intel on Tuesday weren't enough to meet sky-high analyst expectations, as the chipmaker's stock took a 15 percent dive and speculation about a tanking tech sector ushering in a new recession heated up.

The Santa Clara, Calf.-based chip giant reported a 10.5 percent year-over-year increase in fourth-quarter revenue from 2007, pulling in $10.7 billion over a quarter that saw the introduction of its first 45nm processors and unforeseen delays in the introduction of quad-core CPUs by its main x86 rival, Advanced Micro Devices. Intel's gross margins hit 58 percent for the quarter, up 8.5 points year-over-year, while also reporting record microprocessor and chipset shipments, as well as a 105 percent increase in operating income to $3 billion.

But a 38-cents-per share gain in net income for Q4, representing profits of $2.3 billion (up 51 percent from 2006 and 27 percent from the third quarter), didn't meet Wall Street's pre-report expectations of a 40-cents-per-share gain. According to Reuters, if Wednesday trading sees a continuation of the 15 percent after-hours drop in Intel shares, the chipmaker would face the biggest one-day drop in its stock since October 2002.

Intel CEO Paul Otellini and CFO Stacy Smith both expressed concern about emerging storm clouds in the U.S. economy. "We all watch CNBC. You hear all the pundits say the world's going into the wastebasket, and you worry. It could be a self-fulfilling prophecy," Otellini said.

Otellini also predicted that Intel would retain the server chip market share it had gained back from AMD in 2007.

"You saw last year that when servers change in one direction, it tends to move in that direction for some time. And we feel that we have the winds at our back at this time," he said.

Though reluctant to predict price dynamics for the coming year, Otellini said Intel would continue to enjoy "market share inoculation" on the high-end of its product mix while experiencing more competition "lower down in the stack."

He said systems built on Intel's new Montevina notebook platform would begin to be available in the mid-Q2 timeframe. The first silicon samples of the chipmaker's Larrabee GPU would be ready by the end of 2008, Otellini said, with product to be released the following year.