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Wednesday, 16 January, 2002, 06:17 GMT
Intel posts sharply lower profits
Intel website
The world's biggest semiconductor manufacturer Intel has unveiled sharply lower profits, laying the groundwork for a deep cut in investment.

The performance was echoed at Korean memory chip leader Samsung Electronics, whose own net profits dropped 65%.

Intel's performance was buoyed by its success over the holiday period, during which it hit its ambitious Christmas sales forecasts thanks to stronger-than-expected demand for PCs, led by rampant price cutting.

But profits for the final three months of 2001 were still down 77% on last year at $504m, while sales fell by 20% on the year to $6.98bn.

The company said it planned to cut capital investment by nearly a quarter to $5.5bn this year, a move which is expected to spread gloom through the semiconductor industry.

In October, Intel boosted investor sentiment towards semiconductor stocks by announcing that it was sticking to its $7.3bn capital spending plans for 2001 despite difficult market conditions.

Intel's shares closed slightly lower on Tuesday before the company published its earnings statement, and fell by a further 38 cents in after-hours trade to $34.30.

Struggling through

Samsung's performance reflects the tough 12 months through which the once-booming chip industry has had to work.

Its profits of 403bn won ($310m; 213m) for the fourth quarter were even worse than the full year, which dropped 51% to 2,950bn won.

The two companies are market leaders in their respective spheres, and the performance of their competitors was even worse.

In the memory sector in particular, few apart from Samsung managed to turn a profit in 2001.

No recovery yet

Intel, which is predicting flat sales over the next three months, said there is no sign yet of a broad-based pick-up in global demand.

"As to how this bodes for the overall economy, the indicators remain weak and we're continuing to be cautious," general manager for Intel Northern Europe John Woodget told BBC News Online.

Intel recorded its strongest sales growth in eastern Europe and the Asia Pacific region, while sales remained flat or declined slightly in the US and Western Europe.

"This is showing that the investment we've made in the emerging markets is paying off," said Mr Woodget.

Internet equipment maker suffering

In another sign that it remains too soon to sound the all clear for the technology sector, internet networks equipment maker Juniper on Tuesday reported a sharp drop in revenues.

The company's sales for final three months of 2001 fell by 49% from the same period one year earlier to $151m.

Juniper also reported losses of $5.1m for the period, down from a $62.2m profit during the final three months of 2000.

The company, which has been hit hard by savage cutbacks in corporate technology investment, is network giant Cisco Systems' closest competitor.

It has now lost money for three consecutive three-month periods.

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 ON THIS STORY
Stacey Smith of Intel
"We were all a little uncertain after Sep 11th"
See also:

12 Jun 01 | Sci/Tech
Fast chips with bigger bits
18 Apr 01 | Business
Intel profits down 64%
06 Apr 01 | Business
Intel in EU competition probe
09 Mar 01 | Business
Shares battered by Intel
08 Mar 01 | Business
Intel cuts 5,000 jobs
11 Dec 00 | Sci/Tech
The chips go marching on
07 Dec 01 | Business
Intel confident on sales
31 Oct 01 | Business
Intel predicts sharp growth
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