Recession is over, says Intel

BEING THE BELLWEATHER - or Behemoth - of the tech industry,  Intel had all eyes focused on its Q109 earnings figures posted last night. And, while income and profit were down and margins, severely cut, the good news is the recession is behind us.

"We are seeing signs that a bottom in the PC market has been reached," said Intel's CEO Paul Otellini on an analysts' call, adding "I believe the worst is behind us".

Chipzilla reported its first-quarter revenue totaling $7.1 billion, down 13 per cent sequentially, with gross margin down seven points sequentially to 46 per cent. Operating income fell 56 per cent sequentially to $670 million and quarterly net income of $647 million or 11 cents earnings per share (EPS).

Despite predicting that revenues and margins would remain flat in the second quarter, Otellini said the PC market slump had likely reached rock bottom and Intel's factory volumes would probably be back to normal by the end of the year. Indeed, Otellini even expressed concern that Chipzilla may not even have enough manufacturing capacity come December, a highly optimistic forecast in such a dire economic climate.

"Intel has adapted well to the current economic environment and we're benefiting from disciplined execution and agility," said Otellini, adding that while enterprise spending was still down, consumer purchasing was on the up and up again.

"We're delivering a product portfolio that meets the needs of the changing market, spanning affordable computing to high-performance, energy-efficient computing" gushed the Chipzilla chief noting that Intel's fabs had actually started filling up to capacity again, much sooner than the firm had reckoned with.

Surprisingly - or perhaps not - Intel's recession-busting Atom saw revenues drop off by 27 per cent in this first quarter to just $219 million with the average selling price (ASP) for all microprocessors pretty much flat sequentially.

The chip giant's gross margins were also down from 53.1 percent in the fourth quarter of 2008 to 45.6 percent in Q109. Intel blamed the decrease on higher factory underutilisation charges and startup costs.

Intel reckons it did, however, manage to stick to its $2.5 billion spending target and says inventories were reduced by almost $700 million this quarter.

It turns out the chip giant actually overestimated in terms of predicted restructuring and asset impairment charges by a few million, incurring just $74 million rather than the expected $160 million.

Likewise, Chipzilla appears to have acted overly pessimistically by predicting net loss from equity investments and interest of $130-million, when in fact it only managed to lose $18 million.

Understandably though, with the economic recession still looming large, Intel was wary of pulling out its crystal ball for a look into the future at Q209.

The firm said the best it could do was give an internal prediction of flat revenue for the second quarter with yearly capital spending slightly down from 2008. µ