Intel Posts Encouraging Q4 Numbers Despite AMD Payout

"Our ability to weather this business cycle demonstrates that microprocessors are indispensable in our modern world," said Intel CEO Paul Otellini in a statement accompanying the company's fourth-quarter earnings reports. "Looking forward, we plan to deliver the benefits of computing to an expanding set of products, markets and customers."

Intel enjoyed sales of $10.6 billion for the final quarter of 2009, up 13 percent from the previous quarter and up 28 percent from the fourth quarter of 2008 -- a particularly rough sales quarter for computer component makers like Intel which were among the first affected by plunging technology sales in the immediate aftermath of the September 2008 global stock market crash.

For its recently concluded fourth quarter, Intel delivered earnings-per-share of 40 cents, up 36 cents from a year ago, and reported 65 percent gross margins, up 12 points year-over-year and a record high for the company. Despite the settlement with AMD dragging down earnings, Intel still managed net income of $2.3 billion for the fourth quarter, up 23 percent from the third quarter of 2009 and a whopping 875 percent over the fourth quarter of 2008.

But if Intel's most recent quarter offered hope for those looking for a better 2010 for the technology sector, the chip giant's full-year results remained sobering. Intel's $35.1 billion in sales for 2009 were down 7 percent from 2008, while final earnings of $4.4 billion for 2009 were down 17 percent against the previous year. Meanwhile, Intel investors saw EPS drop 15 cents to 77 cents in 2009.

A caveat to Intel's numbers drop for 2009 is that the year not only included the $1.25 billion settlement with AMD in the fourth quarter, but also a $1.45 billion fine paid to the European Union in the second quarter following an EU antitrust ruling against the chip giant. Nor is Intel entirely out of the woods on such matters -- outstanding legal entanglements include antitrust complaints filed by the Federal Trade Commission and the New York State Attorney General.

Going forward, Intel offered more narrow and granular guidance than it has in recent quarters -- itself a sign that the chip giant is more confident of stability in a market rocked by uncertainty over the past year. Intel projected first-quarter 2010 revenue of between $9.3 billion and $10.1 billion, while anticipating gross margins of 61 percent for both the current quarter and for all of fiscal 2010.

On a Thursday call with financial analysts, Otellini hinted at a possible sea change in the way netbooks are distributed, saying that telecom carrier-packaged netbook sales now represent 25 percent of the market and that's likely to grow. He also played up Intel's recent release of its first PC-targeted 32-nanometer chips, codenamed Westmere, with 32nm server chips shipping later in the year.

For the year, Intel confirmed that its netbook-friendly Atom microprocessors and chipsets were far and away the company's growth leaders for 2009. Revenue for Atom products grew 167 percent annually, though that runaway growth appears to be seriously slowing down -- fourth-quarter Atom sales were up just 6 percent sequentially despite a traditional seasonal spike in PC purchases for the holidays.

Meanwhile, the bulk of Intel's non-Atom portfolio fared considerably less well for 2009 when compared to the previous year. Sales of desktop and notebook PC products were down 6 percent for the year, while server products were down 2 percent. But the fourth quarter also marked a nice uptick for what Intel now calls its PC Client Group, which had 10 percent sequential revenue growth, and its Data Center Group, sales for which were up 21 percent from the third quarter of 2009. Revenue for all other products was down 21 percent for the full year, but up 22 percent in the fourth quarter from the third.

Questions still linger for the company -- for example, will Intel's feud with Nvidia and the FTC suit result in a replay of 2009's legal woes? How will Intel recover from the embarrassing suspension of its Larrabee graphics project? Will enterprise IT spending really return to the levels that the high-tech sector is hoping for?

Still, in a year that Intel was hit with the double-whammy of a global recession and years of anti-trust probes and lawsuits coming to a head in bankroll-crippling fashion, the chip giant's resilient 2009 performance was nothing short of impressive.