Intel: Working Through A Chip Glut? (INTC)

Yesterday Intel (INTC) reported net income fell 90% year-over-year as the economy takes it toll. The chip-maker’s problems: Weak global demand for PCs, coupled with a glut of inventory on the market.

But Intel now says its factories have been running under capacity, and the worst of the glut may be over after Q1.

Bloomberg: Intel Corp., the world’s largest chipmaker, said profitability may rebound after the first quarter, when customers finish working through excess supplies. The shares rose.

Gross margin, or the percentage of sales remaining after taking out production costs, was 53 per cent last quarter, the company said yesterday in a statement. That figure will be in the low 40s this quarter, marking the “trough,” Chief Financial Officer Stacy Smith said on a conference call.

Slumping demand for personal computers has forced Intel to run its factories below capacity, making them less profitable. As PC makers run through their existing inventory and reorder, Intel should be able to step up production. The leaner stockpiles also may help the industry bounce back more quickly once the economy turns around, unlike in 2001 when a glut of chips and computers slowed the recovery…

Chief Executive Officer Paul Otellini also said he intends to keep paying dividends and isn’t planning a reduction.

See Also:
Intel Profit Plunges 90% On Miserable Demand
History Repeats Itself: Failed Companies Flood IT Market With Used Stuff

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