Intel has seen a significant profit reduction in the fourth quarter. Intel’s fourth-quarter earnings report reported net income of $2.5 billion, or $0.48 a share. This was down 27% from $3.4 billion, or $0.64 a share, a year earlier. Revenue decreased 3% to $13.5 billion from $13.9 billion. Revenue was in line with analysts’ expectations and net income was higher than the $0.45 a share that the analysts were expecting.
The deterioration of its largest market, personal computers, has had an enormous effect on the business. Intel has scrambled to revive the market with little success so far. PC shipments worldwide declined 3.5% in 2012. 64% of Intel’s revenue and some of its highest profit margins come from chips for PCs. Paul S. Otellini, Intel’s chief executive, said, “The PC business as we’ve known it is evolving. The form factors are going to blur here.”
Intel projected lower revenue and increased pressure on its profit margins for 2013. More people and businesses are buying smartphones and tablets instead of PCs. Bobby Burleson, an analyst with Canaccord Genuity, said, “Longer term, Intel will move more aggressively into smartphones. But everyone worries about their long-term gross margins.”
Intel appears to have managed its business well, even as it gets harder to sell PCs. Intel operates on the principle that making the biggest volumes of the most advanced chips gives it a quality and profit margin advantage over its competitors. The company plans to continue investing heavily in research and development and its new manufacturing facilities. Intel said it would spend $18.9 billion on research and development, along with marketing and administrative costs, in 2013, up from $16 billion two years ago.
Intel is the world’s biggest maker of semiconductors and supplies chips to most of the world’s personal computer makers. Stacy J. Smith, Intel’s chief financial officer, said, “Our manufacturing leadership becomes increasingly valuable. People expect Intel to make more powerful, more efficient devices. That applies across all our businesses.” Intel employs a staff of 105,000 people and is based in Santa Clara, California.