* Sales forecasts light, capex blows past Street views
* CEO says investing in new cutting-edge wafer fab
* Analysts say PC doldrums may leave Intel with surplus
(Adds details from conference call)
By Noel Randewich
SAN FRANCISCO, Jan 17 Intel Corp's
current-quarter revenue forecast disappointed Wall Street, while
a sharp rise in planned 2013 capital spending unnerved investors
who expect personal computer demand to dwindle.
Shares of the world's leading chipmaker slid more than 5
percent after it projected 2013 capital spending at $13 billion
- plus or minus $500 million - exceeding many analysts'
estimates for about $10 billion.
Intel said $2 billion of its increased spending would go
toward expanding a facility for researching future manufacturing
technology. But some analysts worried that expanding too quickly
may create excess capacity that could hurt the bottom line if it
has to idle plants.
"People are starting to freak out about the capex," said
Sanford C. Bernstein analyst Stacy Rasgon. "They are making the
bet this year and hoping for a big revenue lift in 2014. If you
think that PCs are not growing that much anymore, then what's
going to drive it?"
"The concern is that if I spend a lot of money and I build
up my factories, I don't have enough demand to fill them, they
have very high fixed costs, and it pulls your margins down,"
Outgoing Chief Executive Paul Otellini, who plans to retire
in May after a successor is identified, said the investment in
manufacturing would suppress costs in the long run.
"The leading edge capacity is the lowest cost for us on a
per unit basis," Otellini told analysts on a conference call.
"Regardless of what you think the size of the market is, the
leading edge fabs are the single greatest asset that we have."
Otellini said the higher capex is not intended to bankroll a
foundry or contract chipmaking business. But he did not rule out
manufacturing semiconductors for other chip companies - as long
as that did not empower a rival.
In the fourth quarter, Intel's revenue was $13.5 billion,
compared with $13.9 billion a year earlier. Analysts had
expected $13.53 billion in revenue for the fourth quarter.
It estimated first-quarter revenue of $12.7 billion, plus or
minus $500 million. Analysts expected $12.91 billion for the
STRUGGLING IN MOBILE
Facing lower demand, Intel said in October it was running
factories at less than half of their capacity.
Intel is used to being king of the personal computer market,
particularly through its historic Wintel alliance with Microsoft
which has led to breathtakingly high profit margins and an 80
percent market share.
But it has struggled to adapt its technology for smartphones
and tablets, a market dominated by Qualcomm Inc,
Samsung Electronics Co Ltd and Nvidia Corp.
PC makers are struggling to stop a decline in sales as
consumers hold off on buying new laptops in favor of spending on
more nimble mobile gadgets.
Microsoft Corp's long-awaited launch of Windows 8
in October brought touchscreen features to laptops but failed to
spark a resurgence in sales that Intel and many PC manufacturers
had hoped for.
However, some Wall Street analysts gave Intel high marks for
"The revenue isn't going to be there, but the margin and
expense control is going to stabilize the bottom line," said
Cody Acree, an analyst at Williams Financial. "I think it's
probably a success if you can be flat in an industry that most
people expect to be flat-to-down."
It foresees first-quarter gross margins of 58 percent, plus
or minus two percentage points. Analysts on average expected
gross margins of about 56 percent for the current quarter,
according to Thomson Reuters I/B/E/S.
It estimated a 2013 gross margin of 60 percent, plus or
minus a few percentage points. Analysts on average had expected
Net earnings in the December quarter were $2.5 billion, or
48 cents a share, compared with $3.4 billion, or 64 cents a
share, year-ago period.
Analysts had expected 45 cents, and said the surprisingly
strong performance was partly due to a lower effective tax rate
of 23 percent. This was below Intel's forecast of about 27
Still, shares of Intel fell 5.6 percent in after hours trade
to $21.43, after closing up 2.58 percent at $22.68 on Nasdaq.
"This is a company that is continuing to spend money to
participate in the market. That may concern some investors,"
said Doug Freedman, an analyst at RBC Capital.
(Reporting by Noel Randewich; Editing by Richard Chang)