Intel predicts loss

Chip giant Intel is set to record its first lack of profit in 21 years this quarter.

Intel's CEO, Paul Otellini, has fessed up to the possibility the firm may report its first loss this quarter after 21 years of profitability.

An internal memo from Otellini to employees purportedly notes that after 87 quarters of profit, 2009's first quarter is "too close to call".

The financial crisis and ensuing slowdown in the global PC market means Intel factories have had to run below capacity, eating away at company profits. Coupled with Chipzilla's admission last week that the firm's fourth-quarter net income saw a 90 per cent slump, it is not inconceivable the chip behemoth may have taken a serious hit from the crunch monster.

Though analysts have estimated a first-quarter profit of $US228.9 million for the company, Intel noted last week its fourth-quarter net income had dropped to just $US234 million, or four cents a share, way down from $US2.27 billion, or 38 cents in Q4 2007.

Admittedly, the dire results did include the $US1 billion Clearwire writedown, although the firm which is to work with Intel on WiMax also lost 64 per cent of its value last year.

The chip giant failed to offer an official forecast, which, in his memo, Otellini said was a first in his 34 years at the firm. Instead, Intel said it would assume a revenue of about $7 billion this quarter, down 28 per cent from last year.

Intel, based in Santa Clara, California, fell 88 cents to $US12.86 today in Nasdaq Stock Market trading. The shares declined 45 per cent last year.
Otellini noted he had received touching emails from employees who said they would rather endure paycuts than lose their jobs or see colleagues laid off. The memo added there would be no budget for merit pay or promotions any time soon and that the company would only refill vacant jobs on a selective basis.
"We will be focusing on every nickel," Otellini purportedly wrote, adding, "every dollar counts."

Intel will also apparently be forced to cut discretionary spending and slow down factory production, causing certain sites to close and necessitating the relocation of manufacturing workers.