Showgoers visit the Intel booth on the first day of the Consumer Electronics Show (CES) in Las Vegas in this January 8, 2013, file photo.

SAN FRANCISCO | Thu Jan 17, 2013 7:43pm EST

SAN FRANCISCO (Reuters) - Intel Corp forecast quarterly revenue that disappointed Wall Street and a sharp increase in capital spending it plans for 2013 unnerved investors already concerned about slow demand for personal computers.

Shares of the world's leading chipmaker slid more than 5 percent in after-hours trade on Thursday after it projected this year's capital spending at $13 billion, plus or minus $500 million, exceeding many analysts' estimates for about $10 billion.

Intel said $2 billion of its increased expenditures would go toward expanding a facility for researching future manufacturing technology. Some analysts worried that with PC sales already slow, expanding too quickly may create excess capacity that could hurt the bottom line.

"People are starting to freak out about the capex," said Sanford C. Bernstein analyst Stacy Rasgon. "The concern is that if I spend a lot of money and I build up my factories, I don't have enough demand to fill them. They have very high fixed costs, and it pulls your margins down."

Outgoing Chief Executive Paul Otellini, who plans to retire in May after a successor is identified, said the investment in manufacturing would lower costs in the long run.

"The leading edge capacity is the lowest cost for us on a per unit basis," Otellini told analysts on a conference call. "Regardless of what you think the size of the market is, the leading edge fabs are the single greatest asset that we have."

Otellini said the higher capex is not intended to bankroll a foundry or contract chipmaking business, but he did not rule out manufacturing semiconductors for other chip companies as long as that did not empower a rival.

Intel has agreed to manufacture custom chips on behalf of networking equipment company Cisco Systems Inc, Bloomberg reported on Thursday. An Intel spokesman declined to comment.

In the fourth quarter, Intel's revenue was $13.5 billion, compared with $13.9 billion a year earlier. Analysts had expected $13.53 billion.

It estimated first-quarter revenue of $12.7 billion, plus or minus $500 million. Analysts expected $12.91 billion.

STRUGGLING IN MOBILE

Intel is used to being king of the personal computer market, particularly through its historic Wintel alliance with Microsoft Corp, which has led to breathtakingly high profit margins and an 80 percent market share.

But it has struggled to adapt its technology for smartphones and tablets, a market dominated by Qualcomm Inc, Samsung Electronics Co Ltd and Nvidia Corp. PC makers are struggling to stop a decline in sales as consumers hold off on buying new laptops in favor of more nimble mobile gadgets.

Microsoft's long-awaited launch of Windows 8 in October brought touchscreen features to laptops but failed to spark a resurgence in sales that Intel and many PC manufacturers had hoped for.

Intel's hefty investment plans reflect its confidence in the future, even as Wall Street worries about the chipmaker's struggle to gain traction in the mobile market.

"Our core advantage really is our manufacturing leadership," Chief Financial Officer Stacy Smith told Reuters. "450 will give us a significant cost advantage relative to others."

Intel is expanding its research fab in Hillsboro, Oregon, to develop technology for manufacturing chips on 450 mm silicon wafers, a complicated step up from the current 300 mm wafer standard.

Larger wafers can translate into big savings because more chips can be etched onto each of them. But building 450 mm plants is expected to be so expensive that only a few industry leaders, including Intel, Samsung Electronics and TSMC, are expected to have the necessary scale.

Some Wall Street analysts gave Intel high marks for expected operating efficiency this year.

"The revenue isn't going to be there, but the margin and expense control is going to stabilize the bottom line," said Cody Acree, an analyst at Williams Financial. "I think it's probably a success if you can be flat in an industry that most people expect to be flat to down."

Intel foresees first-quarter gross margins of 58 percent, plus or minus two percentage points. Analysts on average expected gross margins of about 56 percent for the current quarter, according to Thomson Reuters I/B/E/S.

It estimated a 2013 gross margin of 60 percent, plus or minus a few percentage points. Analysts on average had expected 59 percent.

Net earnings in the December quarter were $2.5 billion, or 48 cents a share, compared with $3.4 billion, or 64 cents a share, year-ago period.

Analysts had expected 45 cents, and said the surprisingly strong performance was partly due to a lower effective tax rate of 23 percent. This was below Intel's forecast of about 27 percent.

Still, shares of Intel fell 5.6 percent in after-hours trade to $21.43, after closing up 2.58 percent at $22.68 on the Nasdaq.

"This is a company that is continuing to spend money to participate in the market. That may concern some investors," said Doug Freedman, an analyst at RBC Capital.

(Reporting by Noel Randewich; Editing by Richard Chang and Steve Orlofsky)

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Cranes tower over the World Trade Center site in New York's lower Manhattan, December 12, 2012.

WASHINGTON | Wed Jan 2, 2013 10:12am EST

WASHINGTON (Reuters) - Construction spending fell in November for the first time in eight months, as an extended bout of weakness in the business sector outweighed modest growth in outlays on residential projects.

Construction spending dropped 0.3 percent to an annual rate of $866 billion, the Commerce Department said on Wednesday. Analysts polled by Reuters had expected a 0.6 percent gain.

Businesses have shown signs they are holding back on investments because of worries over federal austerity plans, and the construction data could be another sign of flagging confidence.

Private spending on nonresidential projects slipped by 0.7 percent, the fourth decline in six months.

Spending on private residential projects, however, rose 0.4 percent, a reflection of the country's improving housing market.

Home building likely added to economic growth in 2012 for the first time since 2005, although the housing sector remains a shadow of what it was before the 2007-09 recession.

Public sector construction spending fell 0.4 percent. State and local spending edged 0.1 percent higher, while outlays on federal government projects - a relatively small component of overall construction spending - declined 5.5 percent.

(Reporting by Jason Lange; Editing by Neil Stempleman)

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MOSCOW | Thu Dec 27, 2012 2:43pm EST

MOSCOW (Reuters) - The country that oversaw the launch of the world's first artificial satellite hopes to regain some of its former glory with a big boost in space spending announced by Russia on Thursday after a series of failures.

Prime Minister Dmitry Medvedev approved a plan to spend 2.1 trillion roubles ($68.71 billion) on developing Russia's space industry from 2013 to 2020, state-run RIA news agency reported.

"The programme will enable our country to effectively participate in forward-looking projects, such as the International Space Station (ISS), the study of the Moon, Mars and other celestial bodies in the solar system," Medvedev was quoted as saying.

Despite the launch by the former Soviet Union of Sputnik 1 in 1957, triggering the Cold War space race, Russia's space programme has suffered a series of humiliating setbacks in the past year.

These have mostly involved unmanned missions such as satellite launches, that industry veterans blame on a decade of crimped budgets and a brain drain.

Russia budgeted about 100 billion roubles ($3.3 billion) for space programmes annually in 2010 and 2011, far less than the yearly average of the amount Medvedev announced, but he said some of the money would come from outside the state budget.

The failure of a workhorse Proton rocket after launch in August caused the multimillion-dollar loss of an Indonesian and a Russian satellite. A similar problem caused the loss of a $265 million communications satellite last year.

Medvedev criticized the state of the industry in August, saying problems were costing Russia prestige and money.

Since the retirement of its space shuttle fleet last year, U.S. space agency NASA has been relying on Russia to take astronauts to the ISS at a cost of $60 million each, and plans to continue until its own new craft is developed in 2017.

($1 = 30.5645 Russian roubles)

(Reporting By Nastassia Astrasheuskaya; Editing by Michael Roddy)

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WASHINGTON | Fri Dec 21, 2012 12:41pm EST

WASHINGTON (Reuters) - State and local government spending grew at a 0.3 percent annual rate in the third quarter, after 11 straight quarters of contraction, the U.S. Commerce Department said on Thursday.

The last time state and local spending expanded was in the third quarter of 2009, at a much more robust rate of 2.2 percent. Then, for nearly three years, spending contracted sharply, with the biggest drop in the first quarter of 2010 at 5.5 percent.

States are pinching pennies, keeping spending growth slow as the economy recovers from the 2007-09 recession and the federal government sends them fewer funds.

"The recent improvement in the national economy has not translated to strong growth in total state expenditures," said the National Association of State Budget Officers (NASBO) in a report also released on Thursday.

Total state spending likely grew only 0.1 percent in fiscal 2012, the lowest level since the group began tracking state spending in 1987, NASBO said. Most states' fiscal years end in June, which means that many have already started fiscal 2013.

The 2007-09 recession caused states' revenues to plunge and, because all states except Vermont must end their fiscal years with balanced budgets, many slashed spending, calling special legislative sessions to make emergency mid-year cuts.

The federal government stepped in to help with the 2009 economic stimulus plan known as the American Recovery and Reinvestment Act (ARRA), which included the largest transfer of federal funds to states in U.S. history.

NASBO said state expenditures grew 3.8 percent in fiscal 2010 and 2.8 percent in fiscal 2011, mostly due to the assistance. By fiscal 2010 federal money made up nearly 35 percent of state spending, compared with 26.3 percent in fiscal 2008.

Now that the burst of stimulus money is over, states must once again shoulder the costs of public programs, even though their revenues are only beginning to return to pre-recession levels. Federal funds likely only represented 31.2 percent of state spending in fiscal 2012 and will continue to shrink, NASBO said.

"State revenues have not increased as fast as ARRA funds have declined, leading to a unique situation in which total state expenditure growth has slowed during the same time that the national economy has been improving," it reported.

Meanwhile, spending demands continue to grow, particularly for the Medicaid healthcare program for the poor that states operate with partial reimbursement from the federal government.

Over the last three years, the portion of state spending going to Medicaid has risen to 23.9 percent from 22.2 percent. Many states worry that Medicaid will eat up their budgets, and leave fewer dollars for other areas.

Spending on education dipped to 19.8 percent in fiscal 2012, the first time on record that the portion has been less than 20 percent, NASBO said.

(Reporting by Lisa Lambert; Editing by Nick Zieminski)

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* Follows 20 percent reduction in budget

* 2,000 jobs to be axed, senior manager roles to be cut

* Labour unions warn programming, journalism will suffer (Adds detail, background)

LONDON, Oct 6 (Reuters) - The BBC is set to axe over 10 percent of staff in its management, programming and news divisions after Britain's cash-strapped government imposed deep spending cuts on the world-renowned, publicly-funded broadcaster.

The corporation set out the changes on Thursday in response to a 20 percent cut to its annual 3.5 billion pound ($5.4 billion) budget imposed by the government a year ago as part of the deepest public spending cuts in decades.

Unions said the changes would damage independent journalism at a time when a phone hacking scandal has revealed embarrassingly close ties between the Prime Minister David Cameron and Rupert Murdoch's right-leaning News Corp , a long standing critic of the BBC.

The BBC budget was imposed by the government with very little negotiation. Around 600 BBC News posts will now go.

"By 2016, the BBC will be significantly smaller than it is today," it said.

With eight national TV channels, 50 radio stations and an extensive website, the BBC's size and resources had already attracted envy and criticism from rivals, led by James Murdoch at the dominant pay-TV group BSkyB .

As the recession gathered steam in 2008, that criticism intensified as advertising-funded groups such as ITV struggled to cope, cutting staff and budgets.

Under the new plans, the corporation will cut 2,000 jobs, reduce the budget for buying sports and other rights, slash the number of senior managers and share more content.

More repeats will be shown on television and property in west London will also be sold. The changes will result in savings of around 670 million pounds a year by 2016/17.

"The realities of what this country looks like in 2011 and what households up and down the country are going through, what other public institutions are going through, (means) it would be a bit odd if the national broadcaster wasn't feeling some of the same pressures," Director General Mark Thompson said.

LAST MINUTE DEAL

Last year, the BBC agreed to freeze the annual licence fee, payable by every TV-owning British household, at 145.50 pounds. It is also taking on extra costs from the government including funding the BBC World Service, which is broadcast overseas.

The agreement was hammered out in a matter of days, stripping out the months of negotiation normally involved in setting a licence fee, as the coalition government scrambled to cut spending after taking power.

The National Union of Journalists condemned the move and called again for the licence fee to be renegotiatied "especially given what has since emerged about the close relationship between the government and Rupert Murdoch at the time the deal was done."

The media and entertainment union BECTU said the cuts were a direct result of the "shocking 11th hour deal" on the licence fee which "will be the cause of regret for years to come".

The BBC towers over Britain's media landscape with a rich offering of drama, comedy and children's programming, a huge newsgathering operation and some of the UK's most popular websites.

In a lecture more than two years ago, News Corp executive and BSkyB Chairman James Murdoch lashed out at the BBC, accusing it of making a land grab for power and calling for a radical overhaul of British television regulation.

The pendulum has since swung back in favour of looser regulation more favourable to commercial rivals and lower public spending, especially since the recession and the installation of a centre-right coalition government in 2010.

Alex DeGroote, media analyst at London brokerage Panmure Gordon, said the slimming down of the BBC would help level the playing field in Britain, where commercial media companies were up against a far stronger public rival than their peers abroad.

"There's always been a BBC discount for commercial media in this country. It got particularly high in 2002-05. That's when you had a massive expansion of the BBC's inventory -- more digital radio, BBC3 and BBC4, lots of Internet sites," he said.

BSkyB should be well placed to benefit. It is increasing the budget it spends on programming and has recently signed a deal to share the broadcasting of Formula One with the BBC. It is also already very aggressive in acquiring sports rights and drama from the United States. (Editing by Will Waterman and David Cowell)

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1 of 9. Protesters shout slogans during a protest against cuts in public education in central Madrid September 27, 2012.

MADRID | Thu Sep 27, 2012 7:59pm EDT

MADRID (Reuters) - Spain announced a crisis budget for 2013 based mostly on spending cuts on Thursday in what many see as an effort to pre-empt the likely conditions of an international bailout.

Ministry budgets were slashed by 8.9 percent for next year and public sector wages frozen for a third year as Prime Minister Mariano Rajoy battles to trim one of the euro zone's biggest deficits.

"This is a crisis budget aimed at emerging from the crisis ... In this budget there is a larger adjustment of spending than revenue," Deputy Prime Minister Soraya Saenz de Santamaria told a news conference after a marathon six-hour cabinet meeting.

Beset by anti-austerity protests and threats of secession by the wealthy northwestern region of Catalonia, Rajoy is resisting market and diplomatic pressure to apply for a rescue, partly out of concern for national sovereignty but also because European Union paymaster Germany insists Spain doesn't need help.

The central government sees budget savings of 13 billion euros in 2013, with spending down 7.3 percent -- not including social security and interest payments -- and income rising 4 percent thanks to a 15 percent leap in value-added tax take.

The budget goes to parliament on Saturday and debates could last weeks. The country's 17 autonomous regions still must present budgets and find an additional 5 billion euros in adjustments to meet overall public deficit reduction goals.

Spain, the euro zone's fourth largest economy, is now at the center of the euro debt crisis. Investors fear Madrid cannot control its finances and question whether Rajoy has the political will to take all the necessary but unpopular measures.

Madrid is talking to EU authorities about the terms of a possible aid package that would trigger an European Central Bank bond-buying program and ease Spain's unsustainable funding costs.

Brussels has demanded an independent budget oversight body, which Economy Minister Luis de Guindos said on Thursday would be created to review budget execution. The government is still analyzing potential conditions for aid, he said.

The conservative government said tax revenue would be higher than originally budgeted in 2012 -- partly due to a hike in VAT -- allowing it to comfortably cut the public deficit to 6.3 percent from close to 9 percent last year.

Uncertainty over Spain's ability to control spending in regional governments -- which account for half of all public spending and could threaten the deficit goal -- has increased due to the Catalan demands for independence.

The autonomous region's parliament voted on Thursday to hold a referendum on independence, but Saenz de Santamaria said the region must consult the rest of the country first.

PENSIONS WILL BE REVIEWED

Pensions, earmarked by the European Commission as a key area for reform, will rise by 1 percent next year but Treasury Minister Cristobal Montoro would not be drawn on whether the government would pay an inflation catch-up which could be over 3 percent this year.

In a sign of how tight the budget is this year the government said it would use 3 billion euros from social security reserves to pay pensions in 2012.

Before the end of the year the government will announce a pension reform to restrict early retirement and to review sustainability of the pension system which could open the door to accelerating an increase in retirement age.

The deputy premier said the government would set out 43 new laws to reform the economy over the next six months and including reforms to the labor market, public administrations, energy services and telecommunications sectors.

The detailed timetable for economic reforms goes beyond what the European Commission has required and is an ambitious step forward, the EU's top economic official said on Thursday in response to the government announcements.

"The reforms are clearly targeted at some of the most pressing policy challenges," EU Economic and Monetary Affairs Commissioner Olli Rehn said in a statement.

Market reaction was cautious.

"The first impressions (of the announcements) are good, heading towards a major adjustment in spending rather than in revenues," said Jose Luis Martinez of Citigroup in Madrid.

"However, we see as too optimistic the macroeconomic assumption of 0.5 percent recession for the next year. We see a scenario with a deeper recession and if this were the case, further spending cuts will be needed."

De Guindos' statement that the 2012 budget deficit target would be met this year due to a solid increase in revenues will also be viewed with suspicion with many economists expecting the government to miss the objective.

Spending cuts continue to heap pressure on Spaniards and are likely to fuel further street protests, which have become increasingly violent as tensions rise and police use force to disperse crowds.

A quarter of all Spanish workers are unemployed and tens of thousands have been evicted from their homes since a housing bubble burst in 2008 and plummeting consumer and business sentiment tipped the country into a four-year economic slump.

The prime minister's image, both at home and abroad, has deteriorated rapidly since his party won an absolute parliamentary majority last November.

Newspaper pictures of Rajoy enjoying a cigar on Sixth Avenue in New York on Wednesday while protesters gathered in Madrid fuelled criticism of his detached attitude toward Spain's mounting problems.

(Additional reporting by Julien Toyer; Writing by Paul Day; Editing by Fiona Ortiz, Jeremy Gaunt, Paul Taylor and Giles Elgood)

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