February 17, 2005

Why Intel's inventory troubles may cause widespread problems

Author: Melanie Hollands

Intel reported results in January, and despite some positive rhetoric and "positive operating metrics," it doesn't look like its inventory troubles are behind it. If that's the case, then this should have important ramifications in 2005 for prices of semiconductor component prices, hardware at retail, and profits at some component and hardware manufacturers.

The company reported strong mobile MPU sales at the high end of typical seasonality. Numbers were definitely good this quarter. But I think Intel is setting up for a huge miss in the second or third quarter of this year, given margin expectations and inventories, which are still above fourth-quarter 2003 levels. So, unless demand in the PC market is well above normal seasonality in the first half of 2005 -- which I would not wager -- then I think Intel's earnings and margins will come down over next few months.

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