Weak memory pricing hurts Intel revenue

Weak memory pricing hurts Intel revenue

Intel reports record sales in the wake of next-generation product release.

Intel's revenue increase for the fourth quarter fell short of analysts' estimates in part because of weak prices for memory chips.

The company recorded revenue of $US10.7 billion, up 10.5 per cent year over year, missing the $10.8 billion estimated by analysts polled by Thomson Financial.

Though revenue from computing-related products was as expected, revenue from NAND memory was lower than expected due to lower average selling prices, Intel said.

The company reported net income of $2.27 billion, below analysts' estimates of $2.38 billion but a 51 per cent rise year-over-year. Earnings per share were $0.38, short of the $0.40 per share estimated by analysts.

NAND memory pricing flattened in the face of increased competition, Intel Chief Financial Officer Stacey Smith said in a conference call. The pricing continues to be weak into 2008, Smith said. NAND is a type of flash memory commonly used in digital music players and cell phones.

The company hopes to offload part of its flash memory business to Numonyx, a joint venture with STMicroelectronics and Francisco Partners. That deal is expected to close in the current quarter, Smith said. Intel said in December that the parties had delayed the launch of the venture after renegotiating the financing terms.

In November Intel rolled out its next-generation Penryn processors, which the company claims provide better power efficiency and graphics performance than its earlier chips. Manufactured using a 45-nanometer process, the Penryn chips were launched first for workstations, followed in January by 45-nanometer chips for servers, laptops and desktops.

Intel is expected to launch processors for its Montevina platform, an upgrade to its mobile Centrino platform, later this year. It will also roll out Menlow, a platform for ultramobile computers, later this year. Intel is also working on a new chip architecture code-named Nehalem, which will appear in late 2008.

Samples for Larrabee, a high-throughput multicore processor that will scale to teraflops, will ship by the end of 2008, Intel CEO Paul Otellini said during the conference call.

Now manufacturing more than 30 processors using the 45-nanometer process, Intel shipped a record number of chipset and microprocessor products during the year, Otellini said.

Expressing caution about the U.S. economy, Intel is betting on growth in the mobile and server market to drive processor sales and open up emerging markets, he said. Servers and notebooks are growing globally, he said.

Adding the Silverthorne processor, part of the Menlow platform, will help create lower price points for mobile devices, Otellini said.

Intel hopes its quad-core processors and the ongoing transition from 65-nanometer to 45-nanometer products will help it gain share at the high end of the market over Advanced Micro Devices. "We have product leadership that helps inoculate us in the high-end," Smith said. Intel has shipped millions of quad-core processors to date.

AMD delayed volume shipments of its quad-core Opteron processors, code-named Barcelona, in early December when it said it found a bug in the chip's Level 3 cache memory.

Revenue for the full fiscal year was $38.3 billion, up from $35.4 billion in 2006, while net income was $7 billion, up from $5.04 billion.

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