Slumping PC Sales Hit Chip Makers Hard

By January 22, 2009

With computer sales dwindling, it’s no surprise that chip makers are having a rough time. Last week, the two biggest processor-producing companies showed the results of the stagnant PC market. Intel’s Q4 profits were down 90 percent as sales fell from $2.3 billion in Q4 2007 to $234 million in 2008. Shares dropped from 38 cents to only 4 during that period. A good part of Intel’s losses are due to its $950 million write off of Clearwire. Intel acquired the Wi-Fi company in May; since then, Clearwire's stock has fallen 70 percent. Intel invested a total of $1.6 billion in the Las Vegas company. While the chip maker had warned Wall Street that earnings would be down, they was even worse than expected.

Intel saw $8.2 billion in Q4 revenue, a drop of 23 percent. $300 million of that total was with its Atom processors, the tiny chip increasingly used in notebooks and netbooks.  Atoms will soon power smartphones as well.

Things are just as bad for the competition. Advanced Micro Devices (AMD) Friday announced 1,100 layoffs – 9.2 percent of its workforce, as well as massive salary cuts and suspension of 401k matching. This is in addition to the 600 job cuts at AMD since November. AMD expects to announce Q4 losses of 25 percent.

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