SAN FRANCISCO (MarketWatch) — Tech investors who are long Intel Corp. shares should be hoping, as strange as it sounds, that the company made a lot fewer chips.
Given that Intel /quotes/zigman/20392/quotes/nls/intc INTC -6.31% is expected to report Thursday that fourth-quarter sales were slightly down year over year, a significant production cut is the only way the company can bring down its bloated chip inventory.
In the 12 months ended in September, Intel’s inventory rose by 34% to a record $5.3 billion. During that same time, sales fell by 5% at $13.5 billion.
As a result, inventory rose from 28% of revenue in the third quarter of 2011 to 39% of revenue in the third quarter of 2012. (See chart below.)
Even if the company reduced chip output to the target its executives set in October, Intel’s inventory will have ended 2012 significantly higher than it was a year earlier — both in absolute terms and as a percentage of revenue.
That’s a major concern for a company whose biggest customers (like Intel itself) are posting sales that are either flat or falling slightly.
"In the 12 months ended in September, Intel’s inventory rose by 34% to a record $5.3 billion. During that same time, sales fell by 5% at $13.5 billion."
[Oh, gee a September report on inventories. I guessed you missed Stacy Smith's comment on Q4. And excess capacity charges are expected to decrease in Q1 and end in Q2...]
"Our inventories decreased almost $600 million from the third quarter as a result of these actions..."
[Nice attempt at distortion with old news though. That the tech press would write this garbage and not even mention the Q4 information is the kind of lack of integrity we have come to expect from them...]