It's that time again: earnings season, when companies announce earnings whether they have any or not. But luckily for Intel, who kicked things off for semiconductors today, "less bad than we feared" is the new "good."
The downturn continues to take a heavy toll on the computing industry, as Intel kicks off earnings season (which is now kind of a "tallest pygmy contest") with a 55 percent sequential decline in net income and earnings of 11¢ per share. Note that the latter number came in well above analysts' expectations of just 3¢ per share, a profitability boost that was apparently the result of cost-cutting, less-than-expected losses and writedowns, and a very low (1 percent) effective tax rate.
Intel's top-line $7.1 billion net revenue number was precisely in line with what Intel ballparked in last quarter's earnings release, when the company refused to give actual guidance. So, in all, a good report by current meltdown standards (i.e., the surprises were to the upside), even if it was still fundamentally pretty bad.
Still, there were some troubling signs amidst the general, er, gloom. In particular, Atom revenues were down 27 percent sequentially. The company claims that ASPs were effectively flat, so it's not clear to me what's going there. Nonetheless, Atom is supposed to be the hot product that pulls Intel through the slump, when IT spending is way down and consumers are clamoring for cheap chips. Whatever is behind that 27 percent revenue drop, it can't possibly be good.
In a statement, Intel's Paul Otellini stuck to Intel's "demand reset" script. "We believe PC sales bottomed out during the first quarter and that the industry is returning to normal seasonal patterns," said Otellini. The only new twist here is that the company is now claiming that the reset is over, and that we'll start moving up again, from here. Or, rather, we'll start moving sideways, at least, since Intel expects revenues to be flat in the next quarter.
I'm not an economist, but Paul Krugman is, and my understanding of a recent blog post of his is that you'd normally expect a slight bounce once demand has bottomed out, because retailers will constrict restocking severely until existing inventories are cleared, at which point they'll increase restocking to the new, lower level. This final move upwards shows up as a slight sequential bounce, so that the whole curve looks something like a backwards square-root sign.
Apparently others were expecting the post-correction bounce to show up in Intel's guidance, as well, and were disappointed with the company's flat projections and refusal, once again, to give real guidance.
Otellini did tell analysts that "the worst is now behind us from an inventory correction and demand level adjustment perspective," but apparently "the worst" does not equal "all of it." And in this respect, he's almost certainly right. To wit, a report released today showed that there was an unexpected drop in retail sales numbers across nearly all segments, electronics included, this past month. Clearly, consumers haven't quite finished ratcheting down their spending, even if "the worst" is indeed behind us.
Source: ars technica