Only real difference was an accounting entry. — Ed
Actually, they only did a little better than they did a year ago.
You might say, “How the hell can you say they only did a little better when they doubled their profits?”
Can you say, “accounting?”
Intel increased its net income $451 million. However, $441 million of that difference was simply due to Intel writing off goodwill in 2001 but not 2002. (If you buy a company for $10 million dollars, and it has $2 million in assets, the other $8 million is called “goodwill” in the accounting world. It’s the value of a company as a going concern, and it’s written off over a period of time, or when its value drops quite a bit.)
This pretty much boils down to Intel getting rid of some of the real non-processor dogs in the family and losing less money there. That’s good if you own Intel stock, but not important if you’re looking at this to gauge how much you’ll pay for your next processor.
The processor side of the Intel family pretty much stayed about the same, no great changes there.
What was interesting was Intel’s advice on what it expected its profit margin to be throughout the rest of the year. A few years back, Intel’s gross profit margin on profits teetered around 60%. Last year’s price cutting dropped that as low as 49%. It’s recovered a bit to 51%, and Intel expected that margin to improve a bit more to 53%. Improvement will probably be due more to lower production costs (.13 micron) than increased prices.
This all assumes, of course, AMD “behaves” and doesn’t launch a price war. I think that’s a pretty safe bet for 2002, since AMD’s strategy this year is essentially “Hold on, wait for Hammer and make whatever money you can.” 2003 will likely be a different story.
So don’t expect prices to dramatically tumble (or increase) for most, if not all of 2002. Price cutting will probably pretty much follow the roadmap scripts.