by Calculated Risk on 4/14/2009 05:44:00 PM

From Intel CEO Paul Otellini (ht Brian):

As we indicated in our last earnings call, we made significant reductions in our wafer starts to bring inventory in line with the new demand environment. These actions resulted in an inventory reduction of 19%, below the fourth quarter levels. Our spending is being controlled and the number of employees declined by 1400 from Q4 levels. Almost all of the headcount reductions in Q1 and in 2009 will be focused on aligning our factory network to the new demand levels while accelerating our conversion to newer silicon technologies. Our product development machine is in high gear, delivering a new generation of products in all segments. We believe that these products extend our lead in our core businesses and position us for significant growth in the new markets we are targeting. In terms of demand, we saw a few important trends play out this quarter. First, we are seeing signs that a bottom in the PC market segment has been reached. I believe the worst is now behind us from an inventory correction and demand level adjustment perspective. We saw order patterns strengthen throughout the quarter. Desktop sales appear to have hit bottom first and have followed a more normal patterns since early February. In notebooks, the length of the supply chain and higher levels of inventory took longer to work through but now have returned to normal levels. In terms of end user consumption, the consumer segment has held up much better than the enterprise. This is particularly true in consumer notebooks, which continue to be the volume-driver in this segment. Netbook sales continue to grow as anticipated, and are clearly incremental volume for us in a difficult market. In the enterprise segment, the server portion is in reasonable shape. Partially reflecting demand for our newly released dual processor products. The client portion remains weak reflecting constrained budgets and redeployment of older equipment. The installed base of enterprise notebooks is now over three years average age and will need to be upgraded as capital budgets free up. Lastly, in terms of end markets, we saw the US and China demonstrate relative strength while Europe, Japan and the emerging markets showed continuing weakness.

... In closing, while it is clear that our end markets are still impacted by the global financial conditions, we are comfortable with our investment levels and capacity profile. We expect business conditions in Q2 to mirror those of Q1, with some gradual recovering of demand and replenishment of inventories occurring as the industry sees increasing signs of stabilization and a return to more normal seasonal trends.
emphasis added

It sounds like the Q1 inventory correction was very significant, and this could subtract a point or two from Q1 GDP.

Brian comments: [Intel] has historically ... had a poor forecasting track record, so take it with a grain of salt