updated 07:40 pm EST, Tue January 16, 2007
Intel Q4 profits slide
Just as Intel began touting that its technology is the "brains" for the forthcoming Apple TV set-top box from Apple, the company today reported fourth-quarter profit dropped nearly 40 percent as the world's largest chipmaker cut prices and boosted investment in order to gain back lost market share from AMD. However, despite the drastically lower gross margins, price cuts, and higher spending, Intel managed to beat analyst expectations, reporting net income of $1.5 billion, or $0.26 per share, for the December quarter on decreased revenues of $9.7 billion--higher than analysts' expectations of $0.25 EPS and $9.4 billion in revenue (revenue was at the high-end of the company's own forecasts).
Before its earnings release on Tuedsay, the company began touting its own technology as the brains of Apple's revolutionary Apple TV by confirming news of Intel's chip inside the Apple TV on its website.
Confirming other web reports, the Santa Clara-based chip manufacturer confirmed that a low-voltage, small form factor Intel processor is in Apple TV to "wirelessly bring content from a computer (or two, or five) onto the big screen of your living room." The company was also not shy about touting its own technology: "Intel has combined innovative technologies to create the right ingredient to meet the needs of this ground-breaking device," the company wrote on its website.
"Apple TV shows the best of the two companies--Apple's innovation and vision, using Intel's technology. Consumers get the best from this powerful combination" said Deborah Conrad, Intel vice president and director of Team Apple.
AppleInsider over the weekend reported that the device will utilize a 1.0GHz Pentium M-based chip (code-named "Crofton"), which has been under-clocked to run on a 350MHz bus. According to the report, the chip is based on Intel's aged, pre Core-architecture "Dothan" core, first introduced in 2004; the chip includes 2MB of L2 cache and is believed to be under-clocked for lower heat dissipation and lower power consumption.
In addition, the device will utilize an nVidia G72M with 64MB DDR2 video memory (essentially the GeForce Go 7400) and 256MB of soldered 400MHz DDR2 main system memory.
Intel's 2006 fourth calendar quarter results showed a dramatically declining gross profit margin, falling to just under 50 percent of sales from 62 percent a year ago. Going forward, Intel believes that gross margins will hover around 50 percent for 2007. The company, however, continues to believe that using its manufacturing strengths to produce cheaper chips will help it regain lost market share, despite the lower profitability.
"I continue to believe that our shareholders are best served by Intel using its capacity to retake market share that we lost this year," Intel CEO Paul Otellini said. Shares of the company were trading down nearly 4 percent to $21.42 in after hours trading.
Intel's falling profits, but higher-than-expected revenues comes as computer chip sales fell 6.6 percent last year, the largest percentage drop in five years, according to a MarketWatch report. Intel's sales were particularly weak in its region that includes Europe, with revenue falling 17 percent from a year ago to $1.9 billion. In Asia, its biggest market, sales fell 5 percent to $4.9 billion, while sales in the Americas rose 9 percent to $2 billion.