Update: Intel CPUs, channel sales at record highs

Intel's channel sales and unit shipments hit an all-time high during the fourth quarter of 2003, and sales of its mobile and server processors went through the roof, showing 45 percent and 82 percent growth, respectively, company executives said in a conference call with financial analysts.

Intel president Paul Otellini also said the company remained 'optimistic' that a pickup in sales trends would continue. Otellini spoke after Intel reported fourth quarter sales of US$8.74 billion and a profit of US$2.2 billion, both which outpaced financial analysts' expectations. 'The fourth quarter was a fitting way to put three tough years behind us,' Otellini said.

Key to Intel's performance were sales of processors for its mobile, desktop and server lines. Inventory in the channel was held to about 36 days sales outstanding, said Intel CFO Andy Bryant.

'Our channel business set unit and revenue records, and continues to be a key part of our program to drive revenue growth around the world,' Otellini said.

'Our server mix was particularly strong in the fourth quarter, leading to a slightly higher overall [average selling price] and a small increase in market segment share.' Otellini did note some setbacks for Intel in 2003 that were holding over until this year.

In particular, the company said its late-year planned shipment of its Dothan mobile processor slipped, and would not be launched until the second quarter of 2004, he said. 'We were disappointed we didn't begin shipping Dothan as planned,' Otellini said.

Intel decided to hold off on the shipment, so it could make circuit redesigns on the chip 'to enable high-volume manufacturability.'

Intel also reported -- as expected -- a US$611 million write-off in its wireless communications business. That unit lost US$97 million, compared with a US$90 million loss in the same period a year earlier. However, the company also shook that unit up in the quarter, placed it under the domain of its overall communications business, and Bryant said he now expected improved performance.

To the extent that server, notebook and desktop processor sales grew significantly during the fourth quarter, Otellini said he believed technology upgrades were targeted. 'Whether it's people deploying notebooks and needing VPN servers, or people deploying e-business applications' is hard to determine but potentially a driving force behind the growth, he said.

Intel blew past Wall Street's expectations for its sales and profit numbers for the fourth quarter of 2003, posting revenue of US$8.74 billion and earnings per share of 33US cents. Wall Street analysts, on average, had expected sales of US$8.66 billion and earnings per share of 25 US cents.

In the year-ago quarter, the Intel saw sales of US$7.2 billion and a profit of 16 US cents per share. The US-based company's revenue was its best ever for a single quarter, outpacing the US$8.73 billion it reported for the pre-recession third quarter of 2000.

'We ended the year on a high note as ongoing strength in emerging markets coupled with improving demand in established markets drove revenue to record levels,' said Intel CEO Craig Barrett in a prepared statement.

He credited the company's heavy investments during the downturn in helping drive Intel to a record number of processor shipments in 2003.

Intel said it forecasted first-quarter revenue of between US$7.9 billion and US$8.5 billion. Some Wall Street analysts had been predicting first-quarter sales for Intel of US$8.24 billion. For the full-year 2004, Intel was predicting a gross-margin percentage of 62, 'plus or minus a few points,' compared with the 57 percent it earned in 2003.