Intel's Q2 Results Hit Heavily By EU Fine

Intel's Q2 Results Hit Heavily By EU Fine

Intel has announced its fiscal results for the second quarter of 2009, including the impact the European Union's record-breaking $1.44 billion fine against the company. Intel puts a brave face on its report, but the global economic recession clearly took its toll on Intel's sales volume over the past 12 months. The company reports that it saw its "strongest first-to-second-quarter growth since 1988," and expects a seasonally stronger second half.

Compared to 2008, however, 2009 sales have slumped significantly even after we remove the EC's fine from the equation. Revenue in Q2 2009 was eight billion dollars compared to $9.4 billion in 2008. Net income similarly fell, from $1.55 billion last year to just one billion in 2009. Intel noted a number of positive trends in the second quarter, however, including increased microprocessor shipments, a higher-than-expected gross margin of 50.8 percent, and $365 million in revenue from Atom processors and chipsets, up 65 percent sequentially. Atom has only been on the market for just over a year, but the chip's popularity has surprised everyone, including Intel.

In the third quarter, the CPU manufacturer expects revenue of approximately $8.5 billion (plus or minus $400 million), and slightly higher gross margins (53 percent, plus or minus a couple of percentage points). Intel's revenue guidance for Q3 is broader than we'd normally expect, and is likely a tacit acknowledgement of a degree of uncertainty where the market is concerned. There are certainly a number of businesses who would like to see a recovery beginning in the second half of 2009, but there's no guarantee we'll actually see the markets turn upwards over the next six months.

Assessing the impact of the EC's fine
It's important to understand the long-term affect of the EC's
fine whether you agree with the organizations findings or not. For all that the $1.44 billion penalty has been painted as an AMD victory, Sunnyvale itself won't see a penny of that money. Similarly, while the EC found evidence that Intel had illegally and improperly interfered with the CPU market, it cannot order Intel to pay its rival some percentage of the revenue that Santa Clara "took" from AMD.

Unfortunately for AMD, it will not be able to introduce the EC's findings as evidence in the one pending case in which it could receive relief. The real-world impact of the EC's fine is therefore relatively small. For Intel, it's a one-time event that failed to disrupt the company's day-to-day operations or sales, while for AMD, its little more than a moral victory.
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Am I the only one disgusted by this obscenely high fine? Even if we are to assume that Intel is guilty of the accused transgressions, $1.44 billion is ludicrous. Especially when taking into account the fact that AMD will not see a single penny.

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Yeah, it's pretty much utter crapola.

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I respectfully disagree, guys. The fine is intended to be big enough to make Intel actually change their business practices. Any lesser fine, and they would have shrugged it off as a cost of doing business.

Competition is good for the consumer. Intel was trying to win by preventing competition from even occurring. This is a win for all of us that want to see continued innovation in the technology, I think.

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