Thursday, January 15, 2009

Intel Outlook Pared Again; Rivals Unveil New Products

As posted by: Wall Street Journal

Intel Corp. issued a second warning about deteriorating business conditions, signaling further weakness in the computer sector.

Intel sets the tone for the sector with a warning of lower earnings before the bell, based on weaker global demand for computers. Also, investors are rocked by Satyam Computer Services and its potential accounting problems. Rex Crum reports. (Jan. 7)

Intel said Wednesday it now expects to report $8.2 billion in revenue for the fourth quarter -- a 20% drop from the third period -- after issuing a forecast in November that pointed to a decline of about 12%. Fourth-quarter results are traditionally the strongest for the semiconductor industry, and Intel had projected in mid-October that sales would rise 3% from the third period.

Intel's latest warning, which caused its stock to drop about 6% Wednesday, indicates that demand for computers that use the companies chips has faded quickly.

That could cast a pall over announcements expected from several high-tech companies unveiling a slew of new gadgets -- along with the chips that power them -- at the Consumer Electronics Show in Las Vegas.

Rival Advanced Micro Devices Inc., for example, Thursday is announcing a microprocessor for desktop computers called Phenom II that exploits a new manufacturing process to operate faster, which should improve AMD's standing among gaming enthusiasts that want higher performance. Phenom II is part of a combination of chips, code-named Dragon, that includes graphics chips to help with chores such as encoding high-definition content.

Another hot topic at CES is solid-state drives, devices sold by Intel and others that use chips called flash memory, rather than disk drives, to store data. SanDisk Corp. on Thursday is unveiling new SSDs that it says store and retrieve data at extremely high speeds -- more than twice as fast as comparable products shipped in 2008. The devices will be available in mid-2009, starting at $149 for a model that stores 60 gigabytes of data, the company said.

Intel, meanwhile, is planning to use CES to announce its progress in getting partners, like Toshiba Corp. and Samsung Corp., to adopt new Intel chips for consumer-electronics products -- as well as companies adopting the idea of software "widgets," software that Yahoo Inc. has been developing, with Intel's help, to make it easier to call up Web content on TV sets using ordinary remote controls. Comcast Corp. will demonstrate the use of widgets with the cable company's program guide, Intel said.

Intel said Wednesday it was suffering both from a decline in "end demand" -- activity by the consumers and companies that buy computers that use its chips -- as well as actions by computer makers to reduce their inventories.

The company also said that its gross profit margins will be at the bottom of the lowered estimate it issued in November of 55%, plus or minus a couple of percentage points. In mid-October, the company had said the range would center around 59%. An Intel spokeswoman declined to give additional details.

Joanne Feeney, an analyst at FTN Midwest Securities Corp., said the numbers point to grim quarters ahead. "I really don't see the market reaching the bottom until the second or third quarter," she said.

One bright spot for the Santa Clara, Calif., company is Atom, a new chip that has helped fuel the rapid rise of low-priced laptops dubbed netbooks. But the growth in that new niche has not offset declines in bigger product categories, Ms. Feeney said. Atom also is priced lower than other Intel chips for laptops, and comes with lower gross profit margins.

Intel Wednesday said it plans a nearly $950 million write-down on the value of its stake in Clearwire Corp., a company delivering WiMax networking services whose shares are off about 60% in the last year.

Intel also said spending on acquisitions and research and development in the fourth quarter was about $2.6 billion, below its earlier estimate of $2.8 billion. The chip maker added that it will also record $250 million in restructuring charges and write-downs for the period.

Tuesday, January 13, 2009

Dell settles financing, rebate lawsuit with states

As posted by: The Associated Press

SEATTLE — Dell said today it has agreed to a legal settlement with states that claimed the computer company made misleading financing and service offers to PC buyers.

Dell said in a statement it will pay $3.85 million to at least 45 states participating in the settlement. A portion of the money will be used to reimburse states for legal costs.

Shares of Dell dropped 62 cents, or 5.6 percent, to $10.50 in afternoon trading.

Spokesman David Frink said Dell was contacted by the attorneys general from Connecticut and Washington, representing a larger group of states, last year.

"Consumers who sought and believed they received zero-percent financing were then ambushed by high interest rates and fees," said Connecticut Attorney General Richard Blumenthal in a statement. "Many consumers faced unacceptable obstacles obtaining warranty service on their Dell computers and others said they never received promised rebates."

Under the terms of the settlement, Dell agreed to give customers more information up front about what kind of financing they qualify for and allow them to cancel orders once they review final credit terms.

Dell also agreed to mail rebate payments and fulfill warranty obligations within a reasonable amount of time.

The settlement requires Dell to tell customers whether they must troubleshoot problems by phone before qualifying for in-person technical support at home. Dell must also justify claims about its customer service. For example, if it wants to use the term "award-winning," it must have won a customer service award in the past 18 months.

In its statement, Dell said the states' issues "represented only a very small percentage of the tens of millions of Dell consumer transactions in the states."
Round Rock, Texas-based Dell also said it had addressed these problems with many customers directly.

People who bought a computer or service on or after April 1, 2005, and had a problem with a financing offer, rebate or service can file a claim within 90 days with their state attorney general.

Monday, January 12, 2009

LG to Set Sparks Flying

As posted by: Wall Street Journal

London's fireworks this New Year's Eve will come with something extra: a promotional plug.

For the first time, London's municipal government has sold sponsorship rights to the end-of-year spectacle above the River Thames.

The buyer is South Korean consumer-goods manufacturer LG Electronics, which is using the event to send the message that its products make life fun. As part of the sponsorship, at midnight a 10-minute fireworks display will open with one minute of pyrotechnics in LG's colors -- red and white.

Many cities' New Year's Eve celebrations attract sponsors. Waterford Wedgwood of Ireland supplies the crystal ball that drops in New York's Times Square. But advertising is seldom incorporated directly into major fireworks displays, even as subtly as London plans.

LG's signature colors, red and white, will feature in London's fireworks. Last year's display is shown above.

LG's name won't appear in the sky because the company doesn't want to be "crude or crass," says Mark Boyd, a creative director at LG's London-based ad agency, BBH, which is part of Publicis Groupe.

Instead, London officials have agreed that LG can place its logo, a robot-like face forming the letters LG, on hundreds of temporary signs directing people to the event. LG also will be allowed to beam its logo on to the side of a prominent building overlooking the Thames for most of the evening. And contractors will give away thousands of LG-branded hats.

LG executives hope that many revellers will see LG logos as they arrive and connect the red and white fireworks with LG's colors. "New Year's is a time of optimism," says Andrew Warner, LG's marketing director for the U.K. and Ireland. "It all flows back to LG's Life is Good [slogan]."

Mr. Warner and a spokeswoman for London's municipal administration, known as the Greater London Authority, declined to say how much LG is spending on the event.

The company, which makes cellphones, TVs, washing machines and other appliances, may struggle to get a big payback from the fireworks. One problem: there is room for only 180,000 people in viewing areas set aside for the fireworks, according to the London mayor's Web site, limiting the audience to a small fraction of what LG could get through a TV ad.

The entire fireworks display will be shown on TV, but the broadcaster is the state-owned British Broadcasting Corp., which doesn't accept ads and doesn't plan to acknowledge LG's sponsorship, according to a BBC spokeswoman.

To reach more people, BBH plans to make a short film of the fireworks and post it on dozens of Web sites early on the morning of Jan. 1, including Google's, according to BBH's Mr. Boyd. It also will distribute video clips to media outlets around the world, hoping they will include the LG component of the fireworks in news bulletins.

Since hiring BBH last year, LG has increasingly experimented with unconventional advertising to increase its profile. Earlier this year it invited 500 people to the launch in Hollywood of what it said was a new TV show. The event was actually a stunt to promote a new line of televisions.

London has been trying to find a New Year's Eve sponsor for three years, says Harriet McDonald, the head of sponsorship for the Greater London Authority. London officials wanted the advertising to be unobtrusive to avoid offending the public, while marketers were looking for as much prominence as possible.

Another problem: because city officials didn't want the crowds to get too big, they wouldn't allow a sponsor to market the event in advance. London has never sold sponsorship of the fireworks before, although advertisers have sponsored free train travel on the night in the past, a spokesman for the authority says.

This year, several potential sponsors from the finance industry pulled out because of the credit crunch, Ms. McDonald says, before LG signed up in October. London chose LG because the company had ideas to improve the evening, such as projecting welcome messages from celebrities, including actor Michael Caine, on to the side of a building.

"It's not a great big logo jamboree," Ms. McDonald says. "They [LG] have not taken the stance: 'I want to see my logo in as many places as possible.'"