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EU fine drops Intel's quarterly net income US$2 billion

Agam Shah | July 15, 2009
But the results overall 'reflect improving conditions in the PC market,' CEO Otellini says

SAN FRANCISCO, 14 JULY 2009 - Intel on Tuesday reported that its net income for the second fiscal quarter of 2009 dropped US$2 billion year-over-year because of the hefty fine imposed on the chip maker by the European Commission.

The EC fined Intel 1.06 billion (US$1.44 billion) in May after finding it guilty of antitrust violations in the microprocessor market. Intel took a charge of $1.45 billion related to the fine.

The EC accused Intel of anticompetitive behavior and using its market position to dominate the microprocessor space. The investigation focused around Intel giving rebates to computer manufacturers in return for them buying its microprocessors in bulk.

Including the charge, Intel reported a net loss of $398 million on a GAAP basis, or a loss per share of $0.07. On a non-GAAP basis, Intel reported net income of $1 billion and earnings per share of US$0.18.

Revenue for the quarter, which ended June 27, was $8 billion, a drop of $1.4 billion compared to the previous year. Despite the drop, revenue rose sequentially by $879 million compared to the first quarter of 2009, which Intel took as a sign that the second half of the year will be stronger for the company financially.

"Intel's second-quarter results reflect improving conditions in the PC market segment with our strongest first- to second-quarter growth since 1988 and a clear expectation for a seasonally stronger second half," said Paul Otellini, Intel's CEO, in a statement.

The company has estimated that revenue for the third quarter will be around $8.5 billion.

Consumer purchases led the way in strengthening chip demand, while enterprise purchases remained weak, Otellini said during a conference call. Demand may pick up starting next year as enterprises look to refresh products, and there is strong interest in server and desktop chips based on the Nehalem architecture, he said.

The company remains on track to release the eight-core Nehalem-EX processor later this year, Otellini said. Last week, a source familiar with Intel's plans said it would release new Xeon server processors next month.

Microprocessor revenue from Intel's digital enterprise group, which sells chips for servers, desktops and workstations, was $3.4 billion, down from $4.1 billion a year earlier.

The drop in revenue from chips used in laptops and other mobile products was smaller, falling to $2.55 billion from $2.74 billion last year.

Revenue from Intel's Atom processors and chipsets was $362 million, a 65 per cent sequential increase, driven mainly by netbook shipments, Otellini said. Intel's Atom sales during the previous two quarters were dampened by a build-up of inventory in the channel. Inventories had reached normal levels by the start of the second quarter, Otellini said.

 

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