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Competition crimps Intel, Yahoo earnings

Competition crimps Intel, Yahoo earnings
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First Published: Thu, Jul 19 2007. 12 28 AM IST
Updated: Thu, Jul 19 2007. 12 28 AM IST
San Francisco: Shares of Intel Corp., the world’s biggest computer-chip maker, and Yahoo! Inc., the most-visited US website, declined after the companies said competition is reducing earnings.
Intel shares fell $1.14 (Rs46), or 4.3%, to $25.19 in Wednesday morning trading at the Nasdaq stock market, after the company’s second-quarter profit margin fell short of its forecast. Yahoo shares fell $1.09, or 4%, to $26.44. The Internet search company forecast annual sales that trailed what analysts had expected.
Smaller rivals are charging less than Intel and Yahoo to win business. Yahoo’s customers are placing ads on other companies’ websites, aiming to get more value for their advertising dollar. At Intel, discounts by competitor Advanced Micro Devices Inc. have put pressure on prices, chief executive officer Paul Otellini said on Tuesday. That’s eaten into Intel’s gross margin.
“People are disappointed with the gross margin coming in below expectations,” said Greg Barlage, an analyst at Boston-based Baring Asset Management, which oversees $35 billion, including Intel shares.
The Silicon Valley companies kicked off the second-quarter earnings season on Tuesday for the US technology industry. International Business Machines Corp. (IBM) reports on Wednesday, followed by Motorola Inc., Microsoft Corp. and Google Inc. on Thursday.
Yahoo’s net income declined for a sixth straight quarter, falling 2.3% to $164.3 million, or 11 cents a share. The Sunnyvale, California-based company forecast sales for the year of $4.89 billion to $5.19 billion. Analysts in a Bloomberg survey had expected $5.18 billion, higher than the midpoint of Yahoo’s forecast.
Sales of display advertisements, including banner and video ads, increased in the low- to mid-teens in the quarter, Yahoo’s president Susan Decker said. That’s a slowdown from 38% growth in the first quarter of last year and 20% in the first three months of 2007, according to Jefferies & Co. analyst Youssef Squali.
“We have not continually driven innovation in the display business,” Decker said. She was promoted to president last month in a management shakeup that brought co-founder Jerry Yang in as chief executive officer, replacing Terry Semel. Yang and Decker face stiffening competition from social- networking companies, Facebook Inc.News Corp.which charge advertisers less. The market will more than double to $900 million in 2007 and reach $2.5 billion in 2011, according to New York-based research firm EMarketer Inc.
Intel, based in Santa Clara, California, said net income increased 44% to $1.28 billion, or 22 cents a share. Gross margin, or the percentage of sales left after production costs, was 46.9%, missing the midpoint of the company’s forecast range.
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First Published: Thu, Jul 19 2007. 12 28 AM IST
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