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Netbook Popularity and Clearwire Devaluation Eat Away at Intel Profit Margin

8:33 am on January 16, 2009 | Category: Business, Mobile Devices, WiMAX

Santa Clara, California-based semiconductor giant, Intel Corporation, has reported a 90% drop in fourth-quarter profits, due to lower consumer spending on computers, as well as a recent writedown on the value of its Clearwire investment.

Intel generated just $234 million in the final three months of 2008, down from $2.3 billion in the same period a year earlier. Quarterly sales slumped 23% to $8.2 billion, roughly in line with a warning issued by the company earlier this month.

The drop in Intel’s earnings was partly driven by the growing market share of small ‘netbook’ computers, which carry a significantly lower profit margin for chipmakers. Also factored into the quarterly results was a $1 billion devaluation of Intel’s investment in aspiring WiMAX provider, Clearwire Corp., upon fears that an ongoing recession will dampen demand for new wireless communications services.

Intel shares increased more than 2% in after-hours trading last night, as nervous investors expressed relief that results were no worse than initially expected.

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