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Last Updated: Wednesday, 16 January 2008, 23:02 GMT
Intel's record profits disappoint
Intel micro processing chip
Intel is seen as a technology bellwether
Intel, the world's biggest computer chipmaker, has reported record profits in the last three months of 2007.

However, the results were not as good as the market had forecast and its shares fell more than 12% in New York trade on Wednesday.

Net profit rose 51% to $2.3bn (1.2bn), or 38 cents per share, in the three months to the end of December. Analysts had tipped profits of 40 cents a share.

Intel is the latest firm to disappoint, fanning fears of an economic slowdown.

The chipmaker's chief financial officer Stacy Smith said he was "a little bit cautious" on the outlook for the world's largest economy.

I would attribute the weakness to a macro slowdown
Ashok Kumar, CRT Capital Group analyst

He added that: "The estimates may have gotten a little ahead of where we are."

Intel released its earnings after US stock markets had closed late on Tuesday and its shares ended Wednesday 12.4%, $2.81 lower at $19.93.

Wider concerns

Intel produces many of the microprocessors that power the world's computers.

So any sign of weaker-than-expected demand for its products stokes up worries that the technology industry as a whole may be facing problems, with many technology companies unable to maintain current growth levels.

This caused a sell-off in US computer hardware and software firms as the optimism that had been sparked by IBM's upbeat results earlier in the week waned.

Shares in Microsoft were down 3.18% at $32.92, while one of the biggest makers of personal computers, Hewlett Packard, shed 2.24% at $44.04.

Intel said that while it was cautious about the outlook for 2008, it had seen no signs of a tail-off in demand over the crucial Christmas period.

CRT Capital Group analyst Ashok Kumar said that any weakness was due to external pressures, rather than internal problems at Intel.

"The company's competitive positioning is as strong as its been in recent years so I would attribute any of the weakness to a macro slowdown," he explained.

Unsubstantiated fears?

Investors will be keeping a close eye on fourth-quarter earnings from Microsoft and Google, which are out later this month and may give a clearer view of the state of the technology industry.

"You hear all of the pundits saying the world is going to go to a trash basket and you worry," said Intel chief executive Paul Otellini.

"It may be a self-fulfilling prophecy. At this point we don't see anything on the horizon. Our customers don't see anything on the horizon."

SEE ALSO
Intel faces inquiry in New York
10 Jan 08 |  Business
Buoyant sales outlook for Intel
10 Sep 07 |  Business
EU outlines Intel 'market abuse'
27 Jul 07 |  Business
Intel withstands price pressure
18 Jul 07 |  Business
Intel steps up cheap laptop race
05 Jun 07 |  Technology
Intel and STMicro form flash firm
22 May 07 |  Business

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