Summary
Intel, a major technology company, suffered an 8% decline in profit during the third quarter between July and September due to demands for lower prices for their computer chips. What is unclear is whether the PC companies are buying chips because they are running low on inventory, or they predict that there will be many sales of PCs as the holiday season draws near. Intel managed to produce a net income of $1.9 billion. Sales amounted to $9.4 billion, a little more than the predicted $9 billion. This decline in sales shows that the recession “continues to take a toll” even though Intel managed to get more out of its business. The company is expected to make $9.5 billion in the final quarter.
Connections
There are a few connections between this article and chapter eleven. Intel is a manufacturer, which sells its products to wholesalers or retailers in the merchandising business. The PC companies, or the retailers, as part of the inventory cycle, purchases products from Intel to replenish their inventories. Unlike the other businesses we have studied so far which perform services, Intel sells to consumers and therefore sports a sales account in place of a revenue account. Intel had sales of $9.4 billion and a net income of $1.9 billion.
Reflection
The effects of the recession really show in Intel’s 8% decline in sales. I think that rather than just simply restocking their inventory, that PC makers are expecting more sales for the holidays, demanding lower chip prices. This is one of the many times that Intel managed to perform better than expected, with higher sales than predicted even during the recession. Intel is very good at “doing more with less” and getting the most out of the business as shown in their sales of $9.4 billion and profit of $1.9 billion. It is still obvious that the company is affected by the recession.
