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By Don Miller
Associate Editor
Money Morning
Two of America's prominent business bellwethers gave hazy views of what's in store for the U.S. economy today (Wednesday) as Intel Corp. (INTC), reported dismal earnings and Wal-Mart Stores Inc. Chief Executive Officer (WMT) H. Lee Scott said he doubted a quick recovery is in the cards.
Intel, the world's biggest chipmaker, said first-quarter profit fell 55% because of slowing computer demand. And for the second period in a row, the company issued less detailed sales and profitability forecasts than it usually does.
"While we saw some stability in the first quarter, from a historical perspective we're dealing with a lot of economic uncertainty," Chief Financial Officer Stacy Smith told Bloomberg News in an interview. "It's still a very volatile economic environment."
After posting a 90% decline profit in the fourth quarter of last year, Intel said profit dropped 55% in the first quarter of 2009.
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Intel posted net income of $647 million, or 11 cents a share, down from $1.44 billion, or 25 cents a share a year earlier. The company managed to beat analysts' consensus projections of 2 cents a share because it benefited from a favorable tax rate.
While Intel's revenue fell 26% to $7.15 billion, Chief Executive Officer Paul Otellini said he believes PC sales reached a trough last quarter.
"We are seeing signs that a bottom in the PC market segment has been reached," Otellini said on a conference call. "I believe the worst is now behind us from an inventory correction and demand level adjustment perspective."
Orders improved throughout the quarter, with consumer sales holding up better than corporate. PC sales usually decline from the first to the second quarter, before rising again in the third when computer makers increase production to meet back-to-school demand.
Nevertheless, the computer industry bellwether said there's too much turbulence to allow a precise projection for the second quarter. The lack of conviction in Intel's projections left some analysts perplexed.
"We needed to hear more conviction in Intel's guidance," Bill Kreher, a St. Louis-based analyst for Edward Jones, told Bloomberg. "Investors want more visibility."
After bottoming in January, chip orders have improved, leading other analysts to conclude that computer sales will start to climb, benefiting Intel customers such as Dell Inc. (DELL), and Hewlett-Packard Co. (HPQ).
"The question is, 'Is management being conservative?'" Wedbush Morgan analyst Patrick Wang told Reuters. "Especially with the CEO talking about PC sales bottoming out."
Wal-Mart Boss Skeptical of Fast Recovery
Meanwhile, Wal-Mart CEO Lee Scott said Monday that he does not expect a quick turnaround for the U.S. economy, which he believes will continue to suffer throughout the first half of the year.
Speaking at the National Retail Federation's annual conference in New York, Scott said the current downturn also might have long-term effects on consumer spending patterns, representing a fundamental change.
"I'm not necessarily convinced that just when all this liquidity and things hit, if you're going to have the same immediate desire to go back to consumption and debt," he said. "There are a lot of young people who have learned what it's like when you are living on the edge and the bad times come."
Last week Wal-Mart posted lower-than-expected December sales and cut its fourth-quarter profit forecast, showing not even the biggest retailer on the planet is immune to the current economic turmoil.
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Tags: Don Miller
This is just lazy reporting that is exacerbated by scary headline.
The Intel results do reflect a downturn in the economy and there is no denying that. They do need to be considered in the context that Q1 is always seasonally down on the previous quarter. In addition, there the results were better than the "expert analysts" had predicted. Also, bear in mind that the company still made a profit greater than $600m when some had expected a loss and consider that the core trading operations are still highly cash generative.
Listen carefully to what the CEO says and inject some trust in his words; trust that is valid if you track back and see that the company invariably delivers to what he predicts. There may be no formal guidance but he was explicit that Q2 will be essentially flat to Q1.
One data point does not make a trend but the results and the commentary should be seen as neutral to encouraging rather than dismal or full of gloom.
Miller gets an F or effort and an F or independent thinking.
Wall Street Bankers and crackpot analysts have caused terrible turmoil in the global economy since 2000. Copy cat, sensationlist journalism hasn't helped one iota.
I completely agree with the comment above. LAZY REPORTER. Don Miller, you should spend some time at journalism school instead of making these crappy, inaccurate, sensational headlines for the sake of attracting readers.