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Intel Reports ‘Solid’ but Unspectacular Start to 2012

April 17, 2012

It's probably too soon to call Intel's opening salvo in 2012 worrisome, but the chip giant's slightly declining financials for its fiscal first quarter are probably irksome for a company used to peppering its earnings releases with talk of "record-breaking" this and "biggest ever" that.

Intel reported its earnings for the first three months of the year on Tuesday, posting revenue of $12.9 billion, down 7 percent from the fourth quarter of 2011, net income of $2.7 billion, down 19 percent sequentially, and earnings per share of 53 cents, down 17 percent.

The seasonal decline from the holiday quarter is actually fairly normal, if a bit steeper than the chip giant would have probably liked. What's more troubling is that Intel reported a non-charge-associated year-over-year decline in its earnings and EPS for the first time since the dark days of the 2008-09 economic crisis and ensuing recession.

Intel reported a slight uptick in revenue from the first quarter of 2011, when the company pulled in $12.8 billion from sales. But net income was down from the $3.2 billion in profits Intel reported in the year-ago quarter, while EPS dropped from 58 cents per share.

It's also worth noting that Intel's first quarter of 2012 was just 13 weeks as compared with 14 weeks in the first quarter of 2011.

Chief executive Paul Otellini eschewed his usual superlatives in describing Intel's first quarter in a statement released with the company's earnings report.

"The first quarter was a solid start to what's expected to be another growth year for Intel," Otellini said. "In the second quarter we'll see the first Intel-based smartphones in the market, ship products based on 22-nanometer tri-gate technology in high volume, and accelerate the ramp of our best server product ever, providing a tremendous foundation for growth in 2012 and beyond."

Indeed, Intel is expected to release the first processors in its next-generation "Ivy Bridge" lineup before the end of April. The mobile chips in that mix will be used in a new wave of ultrabooks due out later in the second quarter, which could help Intel's fortunes if its big marketing push for affordable thin-and-light laptops with long battery life, fast boot times, and robust security features hits home with consumers.

"Ivy Bridge will be our fastest ramping product ever," Intel's CEO said.

By most measures, Otellini is also right to be confident about Intel's dominant server chip business going forward. It's the company's ability to penetrate the mobile device market with its x86-based products that remains the big unknown.

Intel has new Atom-branded chipsets that it says can compete with the ARM-based processors that currently dominate the consumer smartphone and tablet markets due to their lower power requirements, which results in better battery life for devices like Apple's iPhone and iPad.

Intel will host an earnings call with investors and financial analysts later on Monday.



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