Intel's just reported its fourth quarter earnings for 2009, and they are impressive—with a headline $10.6 billion in revenue. It seems Intel's profited from fab investments, and the netbook boom. Oh, and suppressing the competition.
The main take-aways from Intel's financial results are that $10.6 billion in revenue, which is up 28% over the previous year, a record-level gross margin of 65% (up 12 points over 2008) which translates into a net income of $2.3 billion, up $2 billion over the same figure last year. By all accounts, these statistics indicate that Intel actually overperformed against its expectations.
How's this happened? First off, Intel is riding the back of the surge in PC sales we reported yesterday. As consumer confidence returns, it looks like people are happy to invest in new PC equipment (which perhaps they'd been holding off buying while the economy looked grim), and since that little "Intel Inside" sticker adorns the majority of PCs (even Apple machines now), it'll translate into a profits boost for the chip maker.
Secondly, as they're pointing out over at the New York Times—and as we reported they planned to—Intel made some bold investments in new chip fab plants during the recession, while other tech companies were probably scaling back R&D as a quick and dirty way to save money. This plan seems to have paid off: Intel was investing for longer term payoff. And both the Atom chips it churned out to power all those netbooks, and the new faster Core i3, i5 an i7 chip's rolling out of the new fab plants (ready for the next gen of netbooks, desktops and slim-and-light laptops) have put it in a commanding position in the CPU game.
Thirdly, while we're talking about the CPU game, Intel played dirty. It's true—the European Union found it guilty of monopolistic practices earlier in 2009, and slapped it with a record $1.45 billion fine. The FTC announced its own investigation into the company's "anticompetitive tactics" back in December. The allegations are basically that abusive business habits are endemic throughout the company, and that Intel used its massive size as a lever to force or entice PC makers to prefer its CPU chips over those of rival AMDs. That let it control the market in terms of unit sales, and also to control the price that the end user pays for the Intel hardware. And this then translates into higher profits.
You can even see some of Intel's chutzpah in the financial report: That $2.3 billion net income figure is proudly accompanied by a note that it represents an 875% growth year on year. Which sounds amazing, of course... but what it really means is that last year, Intel's performance in the quarter was dire. Instead of saying "we grew 875%" Intel should have been more honest and reported "We did badly, and we're doing much better now."
Nevertheless, the overall strategy Intel has been following has definitely paid off—and we can't deny CEO Paul Otellini's words that it has enabled the company "to generate unprecedented operating efficiencies while growing [Intel's] traditional business and creating new market opportunities, even in difficult economic times." Whether you approve of Intel or not, its chips are driving the netbook boom which is encouraging consumers to spend more—which will help fight the recession, and thereby result in more companies reporting glowing stats like these. We can only hope that Intel cleans up its business practices a lot on the back of this success, and embraces more transparent habits in the CPU market.