Intel's Dire Earnings Warning Shows Global Recession's Effect

Intel on Wednesday released preliminary earnings figures, which will be finalized in time for its previously scheduled earnings announcement on Jan. 15th. These figures are far worse than the previous warning Intel gave on Nov. 12th.

Intel's prior advisory estimated Q4 revenue to be $9 billion, plus or minus $300 million (originally estimated, pre-global recession, to be between $10.1 billion and $10.9 billion). Meanwhile Q4 gross margin was estimated to be 55% +/- 2%, vs. original expectations of 59% +/- 2%.

Wednesday's preliminary figures show revenue of approximately $8.2 billion, down 20% sequentially and down 23% percent year-over-year. Gross market is at the low-end of the prior estimate of 55% +/- 2%.

More info from the press release:

• The company now expects the net gain or loss from equity investments and interest and other to be a loss of between $1.1 billion and $1.2 billion versus a previous expectation of a loss of approximately $50 million. (see, it's not just your 401K being destroyed)
  

• Just in its Clearwire investment alone, Intel will take a non-cash charge to fourth-quarter earnings of approximately $950 million.
  

• Spending (R&D plus MG&A) is expected to be approximately $2.6 billion, lower than the previous expectation of approximately $2.8 billion.
  

• Restructuring and asset impairment charges are expected to be approximately $250 million, unchanged.

Intel noted that it is currently observing the "pre-earnings quiet period" and that it will not make any further statements prior to Jan. 15th.

Here's an interesting comment that Glen Yeung, an analyst with Citi Investment Research, made to C|Net:

Yeung noted that Intel's previous November revised forecast of a sequential revenue drop of 12 percent would have already marked its worst fourth quarter sequential decline in history. And with this latest announcement, the historic gap gets even wider.

Just the kind of info the stock market loves. Intel is down 4% at the time of this writing.