Year-End Inventory Impacts Intel

Revenue for the fourth quarter rose 6 percent to $10.2 billion. But that was below Intel&'s own revised estimates of $10.4 billion to $10.6 billion.

Intel posted net income of $2.45 billion, or 40 cents per share, an increase of 16 percent over a profit of $2.12 billion, or 33 cents per share, in the same quarter last year. Analysts expected earnings of 43 cents per share, according to Thomson Financial/First Call.

Intel executives blamed an unusually slow December, particularly in desktop processors, where sales and average selling prices slipped. Intel CFO Andy Bryant also cited a persistent shortage of chipsets for desktops and said multinational OEMs had built up $250 million to $300 million in inventory.

But big manufacturers weren&'t the only ones stockpiling motherboards. Syracuse, N.Y.-based system builder Seneca Data bought six months&' worth of motherboards to ensure it could provide customers with the products they want, said Doug Phillips, Seneca&'s senior director of emerging technologies.

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Providing a stable platform is particularly important for VARs and system builders that serve corporate and vertical markets. Contracts often hinge on these solution providers being able to provide a specific configuration.

Although Santa Clara, Calif.-based Intel worked with third-party chip suppliers to manufacture chipsets that were in short supply, many system builders want Intel parts because of the support and warranty that accompany them. “We made a choice to center everything around Intel—their name, support and everything they stand for—and then they say we can&'t sell you boards anymore,” Phillips said.

Intel&'s pain appeared to be Advanced Micro Devices&' gain. Intel&'s smaller rival turned in a strong fourth quarter, buoyed by robust server and mobile sales. Hector Ruiz, chairman, CEO and president of AMD, Sunnyvale, Calif., also noted that relative desktop strength was a surprise.

AMD&'s fourth-quarter sales were $1.84 billion, up 45 percent; net income was $96 million, compared with a loss for the year-earlier period.