SAN JOSE, Calif. (Map, News) - Intel Corp. lowered its profit forecast for its fiscal first quarter Monday, blaming the shortfall on a steeper-than-expected drop in prices for memory chips.
The Santa Clara-based company, the world's largest semiconductor maker, said slumping prices for a type of memory called NAND flash depressed profits more than anticipated. NAND flash is commonly used in portable electronic devices like digital cameras and MP3 players.
Intel said its gross profit margin - a key measure of profitability that gauges a company's ability to control manufacturing costs - would come in at 54 percent of revenues, plus or minus a percentage point. That's down from its previous forecast of 56 percent, plus or minus a couple percentage points.
The company said its other guidance had not changed, including its expectation of revenue between $9.4 billion and $10 billion for the quarter. Analysts surveyed by Thomson Financial on average expect Intel to ring up sales of $9.7 billion.
The company is expected to provide more details on the shortfall Wednesday during a meeting with investors at its Silicon Valley headquarters.
Intel's announcement reflects a trend that has benefited makers of personal computers and electronic gadgets but cut into chip makers' profits.
Intel's primary business is making microprocessors - the brains of personal computers - but it also makes memory chips. The company's microprocessor business is thriving from robust PC demand, but Monday's announcement illustrates that Intel is still vulnerable to swings in the volatile memory market, which has been under intense pricing pressure because of oversupply.
Other companies have also been hurt by falling memory-chip prices.
Samsung Electronics Co., the world's largest manufacturer of memory chips, saw its profit sink more than 6 percent last year, dragged down by plunging prices for NAND flash chips and DRAM, or dynamic random access memory, the most common type of memory chip in personal computers.
Analysts are warning the pressure could continue into 2008 because of global economic uncertainty that is causing companies to clamp down on spending.
NAND flash makers are likely to look back "with nostalgia" on 2007, a year in which sales grew more than 12 percent to $13.9 billion, according to market research firm iSuppli Corp.
Last month the firm cut its 2008 forecast for NAND revenue growth from 27 percent to the single-digit range. The move was triggered by iPod maker Apple Inc. apparently slashing its NAND order forecast, warning suppliers that it would likely buy fewer of the chips because of slowing growth in demand, according to iSuppli.
Intel is the fifth largest maker of NAND flash, behind Samsung, Toshiba Corp., Hynix Semiconductor Inc. and Micron Technology Inc., according to a ranking by iSuppli.
Intel has benefited from making a quicker transition to a new chip-making process than its smaller rival, Advanced Micro Devices Inc. The two compete primarily in the market for microprocessors.
The new manufacturing process shrinks the size of the circuitry on the chips to an average width of 45 nanometers - or 45 billionths of a meter - which clears the way to add more transistors to each chip, which improves performance.
Intel made nearly $7 billion in fiscal 2007, which ended in December, an improvement of roughly $2 billion over 2006, when the company was hurt by a fierce price battle with AMD. AMD, meanwhile, lost nearly $3.4 billion last year, dragged down primarily by expenses from a costly acquisition.
Shares of Intel gained 4 cents to $20.01 during the regular trading session Monday, before falling 46 cents to $19.55 in after-hours trading following the announcement.
Form : Examiner.com - USA
