Market Scan
Memory Problems For Intel
Carl Gutierrez, 03.04.08, 8:25 PM ET
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If chipmakers provide an early warning of turmoil in the technology sector, then sirens were blaring Tuesday.
Late on Monday, the world's largest semiconductor maker said lumping prices for a type of memory called NAND flash depressed profits more than anticipated. The drop led the company to lower its earnings forecast for its fiscal first quarter. NAND flash is commonly used in portable electronic devices like digital cameras and MP3 players.
Intel (nasdaq: INTC - news - people ) shares were off 2.7% in afternoon trading, but made a comeback to close down only 0.5%, or 1 cent, at $20.00.
The company said its gross profit margin--a key measure of profitability that measures a company's ability to control manufacturing costs--would come in at approximately 54% of sales. The company had previously forecast approximately 56%. Intel's announcement pressured U.S. stocks in premarket trading as it prodded at established fears over corporate profits.
Still, according to John Lau, an analyst at Jefferies, the news isn't so bad.
"We believe that Intel remains well positioned to gain market share on the back of its superior products and manufacturing prowess," Lau said. "The outlook for microprocessor and PC sales remains robust for 2008 driven by emerging markets trends."
Intel's pain, though, has been pleasure for makers of personal computers and electronic gadgets. It also underscores Intel's vulnerability to the volatility of the memory-chip prices, despite huge gains the company made in recent quarters in the profitability of its products.
Intel's announcement came one day after it announced a new line of processors named "Atom" on Sunday. The new product is aimed at the market for pocket-sized Internet devices and slimmed-down computers. (See: "Intel Goes Atomic")
Intel plans to begin shipping the processors to its manufacturing partners this month. The company is aiming to take advantage of its dominance in the market for PC processors by invading the market currently dominated by ARM (nasdaq: ARMHY - news - people )-based designs offered by the likes of Samsung and Texas Instruments (nyse: TXN - news - people ).
The Associated Press contributed to this article |
