The company's Q4 sales were slightly higher than its most recent guidance of $6.7-to-$6.9 billion, but Intel said it now expects revenues in the first quarter of 2002 to be sequentially flat-to-down 8.6% from Q4 because of seasonally weaker market conditions. The Q1 revenues are expected to be in a range of $6.4-to-$7.0 billion.

Intel's net income, excluding acquisition-related costs, also beat Wall Street's estimates at $998 million in the fourth quarter. Earnings per share were $0.15 vs. analysts' consensus of $0.11, according to First Call/Thomson Financial. Including acquisition-related costs, Intel's net income was $0.07 per share.

Nearly all of Intel's growth came from its microprocessor and chip set business, which accounted for 83% of its Q4 revenues.

Intel today also said it has set capital spending for 2002 at $5.5 billion, down 24% from a record $7.3 billion in 2001. (The company had said earlier that it would spend $7.5 billion last year.) Intel has also set its R&D budget at $4.1 billion in 2002, up from $3.8 billion in 2001.

About half of Intel's planned 2002 capital spending will be used for fab equipment purchases, with the majority of those tools being 300-mm wafer systems, said Andy Bryant, executive vice and chief financial officer at the company. During a conference call with analysts today, the CFO said about one-third of the 2002 capital expenditures would be for buildings--a significant reduction compared to the prior year.

"What comes down sharply is the construction--over $1 billion reduction there, and a little less than $1 billion reduction in equipment," he told analysts after the results were issued today. He also said Intel believes its 300-mm fabs will be more efficient than new 200-mm plants.

"The capital spending for 2002 would have been in excess of $6.5 billion if we had not transitioned to 300-mm wafers," Bryant added.

Overall, Intel executives were happy to see last year come to a close. "While 2001 was difficult for Intel, I can't imagine changing places with any other company on the planet," said Craig R. Barrett, president and chief executive officer of the world's largest chip maker. "Our 2001 R&D and manufacturing investments position us to grow faster than the industry when the high-tech recovery occurs."

Revenues in Intel's Architecture Group--the company's main microprocessor and chip set businesses--grew 7.4% to $5.79 billion in Q4 from $5.39 billion in the prior quarter. The group had an operating profit of $1.81 billion in the fourth quarter. Intel said its processor unit shipments set a record in Q4 and both chip set and motherboard deliveries were sequentially higher than Q3.

Intel's Communications Group posted a 1.7% sequential increase in sales to $590 million in the fourth quarter compared $580 million in Q3. The Communications Group's operating loss was narrowed to $129 million in the fourth quarter vs. a loss $218 million in Q3.

Revenues in Intel's Wireless Communications and Computing Group--mostly flash memories--were up 1.8% to $518 million in Q4 compared to $509 million in Q3. The group's operating loss was cut to $20 million in the fourth quarter vs. a loss of $59 million in Q3. Flash memory orders have stablized but overall remain remains weak, said Bryant during the conference call with financial analysts.

"The year that began with economic decline, ended on a note of stability," said the chief financial officer. "Despite a weak economy, order patterns held through the end of the fourth quarter and demand was better than expected boosting revenue and profits."

For 2001, Intel's revenues dropped 21% to $26.5 billion from $33.7 billion in 2000. The company's net income, excluding acquisition-related costs, was $3.6 billion in 2001 vs. $12.1 billion in 2000. Including acquisition costs, Intel's net income was $1.3 billion, compared to $10.5 billion in 2000.

Intel expects to have a gross margin percentage of 50% in the first quarter of 2002, plus or minus a couple of points, compared to 51% in the fourth quarter.

--J. Robert Lineback