Intel earns 45% more in 2007 than in 2006

It was by any measure a stellar year for the world's leading microprocessor manufacturer, but what's disappointing investors this quarter is the disheartening news that 2007 is over.

It doesn't take much to disappoint Wall Street, and in recent days, investors are looking any excuse to justify a selloff that was probably well overdue anyway. But Intel has fully recovered from its last wave of restructuring, and shows no signs of future trouble. What it does show is some reduced growth -- not a pothole ahead, but not smooth sailing, either.

While revenue for the last quarter of 2007 was up over the third quarter by 6%, to $10.7 billion, that didn't reflect the "seasonality" that used to typify the revenue pattern of a major player in the PC industry. With the home PC trending toward a commodity product last year, it wasn't the big ticket item this last Christmas, and that showed in Intel's numbers.

However, with restructuring behind it, the company could keep a bigger chunk of that revenue to itself: $2.3 billion of net income, up 51% over the same quarter last year.

The year 2007 was all about "payback time" for Intel. While its annual revenue only climbed a modest 8% to $38.3 billion for the year, net income was up a delightful 38% to $7 billion, and earnings per share climbed 37% to $1.18. The reasons are pretty much obvious now: Intel regained a lot of what it had lost to AMD in all critical market segments, including and especially in server CPUs.

So what's the problem? First, it's the fact that this quarter's numbers came in on the low side of guidance, which means that three months ago analysts were told to expect a ballpark range, and when you divide that range in half, today's figures were within the lower half.

Next comes the guidance for Q1 2008, which calls for less than $10 billion of revenue and a gross margin getting nicked to 56%. For the full year 2008, the company's financial officers are only expecting 57% gross margin, which suggests that its fourth quarter 2008 won't necessarily be any better -- if it actually had to be -- than the fourth quarter of 2007.

Still, with startup costs for 45 nm production coming in less than anticipated, the road for Intel's market share comeback still looks unencumbered for now.