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Earnings Hurt Intel and Yahoo Disappointing Reports Drive Shares Down

Posted on: Thursday, 19 January 2006, 12:00 CST

By From news reports

Shares of Intel and Yahoo plunged Wednesday, leading the slide in global technology stocks, after the companies reported disappointing earnings. Intel, a bellwether for the technology industries, reported late Tuesday revenue of $10.2 billion for the fourth quarter, up from $9.6 billion a year earlier, a 6 percent increase. But the latest sales figure fell $200 million short of the low end of the company's own forecast, which was issued less than a month ago. Intel executives said that December, which is traditionally strong for chip sales, was a weak end to an otherwise strong year for the company. Yahoo, meanwhile, said late Tuesday that its profit rose 80 percent in the fourth quarter, but after several special items were deducted, the figure fell short of Wall Street's expectations. Moreover, Yahoo, which runs the world's largest Internet portal, predicted slower revenue growth in the year ahead, with reduced profit margins. Shares of Intel, the world's biggest chipmaker, dropped 11 percent to $22.66 in late morning trading as five analysts, including those at Citigroup and Lehman Brothers, lowered their ratings. Yahoo slumped 10.6 percent to $35.84.

"It's ugly stuff," said Mike Green at Benham & Green Capital Management in La Jolla, California. "Their numbers are disappointing across the board." IBM, which also posted earnings after markets closed Tuesday, pleased investors as cost cuts helped profit rise despite a drop in sales. (Page 16)

Intel, Yahoo and IBM were among the first to report earnings this quarter. Earnings from Apple, Advanced Micro Devices and Ebay, all of which were scheduled to report after markets closed Wednesday, should give investors a better idea of how Internet and technology companies fared as 2005 closed.

Andy Bryant, Intel's chief financial officer, said the sluggish sales in the latest quarter were the result of a shortage of chip sets, components that work with microprocessors. Some of the chip sets come from outside suppliers. He said "2005 was a great year punctuated by a difficult December." Intel has been facing intense competition from AMD, and Bryant said Intel had probably lost about a percentage point of market share in the fourth quarter. But Paul Otellini, Intel's chief executive, told analysts that he felt Intel would regain market share as the company strengthened its line of dual core processors this year. Net profit was $2.45 billion, or 40 cents a share, for the quarter, up 16 percent from $2.12 billion, or 33 cents a share, a year earlier. Wall Street analysts had forecast that the company would earn 43 cents a share on sales of $10.56 billion, according to a survey by Thomson Financial. Yahoo reported fourth-quarter profit of $683 million, or 46 cents a share. Those results were increased by $436.6 million in unusual items, mainly related to a gain on its investment in its Chinese operation and a tax benefit. Excluding those items, Yahoo earned 16 cents per share, a penny shy of analysts' expectations. The company's revenue was $1.5 billion in the quarter, up 39 percent. Analysts prefer to look at Yahoo's revenue after deducting payments to the owners of other Web sites on which it sells ads. On that basis, Yahoo's revenue was $1.07 billion, up 36 percent and exactly what analysts had forecast.

Source: International Herald Tribune

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