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That was good enough to send Intel's shares up 2.1% in after-hours trading.

Net income was $234 million, or 4 cents a share, compared with $2.3 billion, or 38 cents a share, in the year-ago period.

The Santa Clara, Calif.-based company's profits are being squeezed by a freeze in information-technology spending and a shift toward low-margin processors for a class of little laptops known as "netbooks." A big reason for the severity of the fourth-quarter drop, though, was a $1 billion write-down of the value of Intel's investment in Internet provider Clearwire.

Clearwire specializes in a new type of wireless broadband technology called WiMax that Intel is building into its chips, and has stumbled on fears the credit crunch will derail its ambitious network buildout plans.

Intel's sales were $8.2 billion, a 23% shortfall from last year. Intel blunted the shock of the big declines by lowering its guidance twice.

For all of 2008, Intel earned $5.3 billion, 24% lower than a year ago, on sales of $37.6 billion, a 2% decline.

Intel's first-quarter forecast of around $7 billion in sales might have helped soothe some investors' nerves. The guidance was murky — Intel said it wouldn't give a precise estimate because of the economic uncertainty — but the figure was at the low end of what analysts were expecting.

Analysts surveyed by Thomson Reuters were expecting $7.3 billion, on average, but estimates ranged from $6.6 billion to as high as $9.3 billion.

During the regular trading session before the earnings report, Intel stock rose 21 cents, 1.6%, to close at $13.29. The shares hit $13.58 in after-hours trading.