Intel Discloses U.S. Operations Lost $350 Million Last Year
2002-03-13 17:26 (New York)
Intel Discloses U.S. Operations Lost $350 Million Last Year
Washington, March 13 (Bloomberg) -- Intel Corp. disclosed
that its U.S. operations recorded a $350 million loss last year,
with all the company's income before taxes coming from overseas.
The world's largest semiconductor manufacturer, Intel had
reported that income before taxes last year totaled $2.18 billion.
An annual report filed with the Securities and Exchange Commission
today disclosed that the figure included the loss at home and non-
U.S. earnings of $2.53 billion.
During last year's fourth quarter, Santa Clara, California-
based Intel also derived a larger percentage of sales from the
Asia-Pacific region than the U.S. for the first time, said Intel
spokesman Tom Beermann. That reflects the growing importance of
overseas markets for Intel and its customers who manufacture
personal computers.
``Growth has slowed pretty dramatically in the U.S. for PCs,
but it continues to be much healthier in developing countries,
like Eastern Europe, China, India and South America,'' said Eric
Rothdeutsch, an analyst at Robertson Stephens.
Part of the increase in overseas revenue can be traced to
trends in PC manufacturing, analysts said. Compaq Computer Corp.
and other U.S. PC makers have sought to cut costs by shifting
product assembly to ``contract'' manufacturers, many located
overseas.
``Nobody wants to manufacture in the U.S. anymore,'' said
Hans Mosesmann, managing director of semiconductor research at
Prudential Securities. ``All the high-volume markets are going
international.''
Investment Losses
Beermann said the company's U.S. deficit, in part, reflected
investment losses. The Intel spokesman said the company recorded a
$466 million loss on the sale of securities last year, compared to
about $3.8 billion in gains in 2000.
The company also lists ``goodwill,'' the combined premium
over book value that the company has paid for past acquisitions,
mostly on its U.S. financial results. Goodwill assets must be
deducted from profits each year.
In recent years, Intel's U.S. operations accounted for about
70 percent of the company's income before taxes. In 2000, Intel
reported $11.16 billion income before taxes from U.S. operations.
Non-U.S. income before taxes was $3.98 billion in 2000, according
to Intel's annual report.
More troubling to investors, some analysts said, may be the
fact that Intel's operating profit shrank last year. Competitive
pressures and Intel's desire to clear out older chips prompted the
company to cut prices, which lowered the amount of profit booked
on each semiconductor.
Struggling Units
Intel's dominance of the market for chips put in computers
sold to corporations -- as opposed to consumers -- helps to
explain the declining profitability, said John Greenagel, a
spokesman for rival Advanced Micro Devices Inc. The corporate
market, which offers fatter profit margins than the consumer
business, suffered a sharp slowdown in 2001.
``When that sector becomes weak, it impacts them more than it
does us,'' Greenagel said.
The Intel Architecture group, which manufactures chips such
as the Pentium 4 processor for desktop and notebook computers, may
have remained profitable in the U.S. last year, though not by
enough of a margin to offset losses at other Intel units.
Two other parts of Intel's operations -- the communications
group and the wireless business -- suffered combined operating
losses of $991 million last year, mainly from business in the
U.S., the annual report showed.
Wireless Slump
The communications group sells semiconductor devices to
manufacturers of networking and communications products tied to
the Internet, while the wireless business markets flash memory
chips to makers of handheld computers and cellular telephones.
The decline in these two businesses may have contributed to
the U.S. losses, said John Geraghty, an analyst at Gerard Klauer
Mattison & Co. ``Everyone's communications business has gone down
the tubes,'' Geraghty said. Intel is ``not immune to any industry
trends here.''
As domestic sales to customers such as Dell Computer Corp.
and Compaq slowed, small computer manufacturers in developing
countries, whose products are known as ``white boxes,'' also have
been able to get more chips, Rothdeutsch said.
Last year, Intel reported that its U.S. revenue fell 32
percent, compared to a 4 percent decline in the Asia-Pacific
region and a 19 percent decline in Europe. Revenue from customers
in Japan decreased almost 24 percent.
Intel shares, which have risen 20 percent over the past six
months, fell $1.65 to $31.34 today.
--Miles Weiss in Washington (202) 624-1879 or at
mweiss@bloomberg.net. Editor: Parry
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