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.
I agree that the 8% decline in Intel's profits was due to demands for lower prices and the recession. It really impressed me that despite the recession they were still able to earn more than others had first predicted. It shows that Intel is very successful which was why they were able to maintain a steady profit despite the economic crisis. Although they made the decision to lower their price demands which caused a decline in profit, they did it with the intention of getting better financial outcome. It was a risky yet bold decision and they managed to pull it off. That impressed me the most because I like companies that are willing to do whatever it takes to get the best out of their company.
ReplyDeleteRecession is affecting all businesses and as we can see Intel is no exception. I think that Intel should stock up on a large amount supply and get ready to go on an all out sale for the winter. Research shows that most businesses makes majority of their revenue from the end of the year. If Intel would were to do this, I believe that they would earn a lot of revenue. Many people would be looking for the cheaper technology Intel has to offer. Although it may be costly at first, I believe that this can also be their ticket out of recession.
ReplyDelete