Intel 3rd-Qtr Earnings Rise; Sees Lower 4th-Qtr Sales (Update4)
By Dan Goodin
Santa Clara, California, Oct. 15 (Bloomberg) -- Intel Corp. said third-quarter net income rose as acquisition costs dropped. The world's biggest maker of computer chips expects sales this quarter to fall, pushing the shares down as much as 14 percent.
``We're seeing soft demand right now in our end markets, and today I can't see that it changes,'' Chief Financial Officer Andy Bryant said in an interview. ``We're looking at a fourth quarter we think is at the low end of what you would typically expect.''
Consumers are buying less expensive personal computers, and businesses are delaying PC upgrades, squeezing Intel's profit, investors said. Intel expects fourth-quarter sales to drop to $6.5 billion to $6.9 billion, from $6.98 billion a year earlier. Analysts had predicted $6.92 billion, the average estimate in a Thomson First Call survey.
Third-quarter net income increased to $686 million, or 10 cents a share, from $106 million, or 2 cents, a year earlier. Sales fell to $6.5 billion from $6.55 billion.
`No Sales Drivers'
The Santa Clara, California-based company said profit would have been $768 million, or 11 cents a share, excluding some costs. On that basis, which doesn't comply with generally accepted accounting principles, profit missed the 13-cent average estimate from First Call.
``There are no drivers right now'' for sales, said Michelle Connell, who helps manage $75 billion at Wells Fargo Private Client Services, which owns Intel shares. ``The replacement cycle is getting longer and longer.''
Intel shares dropped $2.13 to $14.39 at 6:29 p.m. New York time after the earnings report. They fell as low as $14.25. The shares have lost almost half of their value this year.
Intel's gross margin, a measure of profitability given as the percentage of sales left after subtracting production costs, will be 49 percent this quarter and in the full year. The company had previously given a forecast of 51 percent ``plus or minus a few points'' for 2002.
Unused factory space that drove up the cost of production was the primary reason for revision, Bryant said on a conference call with investors. ``If you saw our revenue increase you'd expect to see a gross margin uptick,'' he said.
Savings From Cuts
Intel has yet to see much savings from reductions it's made to its workforce, Bryant said. The company in July said it planned to cut 4,000 jobs, or 4.8 percent of employees, after paring 7,000 positions last year. Bryant said Intel was on track to complete the cuts, mainly through attrition and voluntary severance, by the end of the year.
Sales from Intel's communications unit fell 17 percent to $482 million from the year-earlier quarter, as telecommunications companies such as WorldCom Inc. filed for bankruptcy. Chief Executive Craig Barrett is increasingly counting on the group to counter the effects of slowing PC growth.
Revenue in the U.S. was at the ``low end of expectations,'' largely because students returning to school didn't buy as many new computers as Intel had expected, President Paul Otellini said on the call. Latin American sales suffered from financial problems in Argentina and Brazil, he said.
In Asia, sales surged a record 20 percent from last year, Otellini said. Business from Intel's wireless group also helped bolster revenue, growing 15 percent to $586 million, largely on the strength of flash-memory sales, which are used to store phone numbers in cellular phones. Intel continued to take market share from competitors, Otellini said.
Spending
Spending on computer-related gear slipped in 2001 as businesses delayed purchases while their own profits dropped, and investors said they're again revising forecasts for when companies will start replacing PCs bought in the 1990s.
Intel reduced planned spending on new plants and equipment to $4.7 billion this year from $5 billion to $5.2 billion the company had budgeted.
That sent shares of semiconductor-equipment companies tumbling. Applied Materials Inc. fell as much as $1.27 to $11.78. Teradyne Inc. declined as low as $9.50 from $9.90. Novellus Systems Inc. dropped $2.33 to $23.80.
Lam Research Corp. fell as much as 62 cents to $8.70, and KLA- Tencor Corp. declined as much as $3.05 to $28.75. All of the stocks gained today before Intel's report.
Intel had acquisition-related costs in the third quarter of 2001 of $609 million. In the recent quarter, such costs declined to $108 million.
By Dan Goodin
Santa Clara, California, Oct. 15 (Bloomberg) -- Intel Corp. said third-quarter net income rose as acquisition costs dropped. The world's biggest maker of computer chips expects sales this quarter to fall, pushing the shares down as much as 14 percent.
``We're seeing soft demand right now in our end markets, and today I can't see that it changes,'' Chief Financial Officer Andy Bryant said in an interview. ``We're looking at a fourth quarter we think is at the low end of what you would typically expect.''
Consumers are buying less expensive personal computers, and businesses are delaying PC upgrades, squeezing Intel's profit, investors said. Intel expects fourth-quarter sales to drop to $6.5 billion to $6.9 billion, from $6.98 billion a year earlier. Analysts had predicted $6.92 billion, the average estimate in a Thomson First Call survey.
Third-quarter net income increased to $686 million, or 10 cents a share, from $106 million, or 2 cents, a year earlier. Sales fell to $6.5 billion from $6.55 billion.
`No Sales Drivers'
The Santa Clara, California-based company said profit would have been $768 million, or 11 cents a share, excluding some costs. On that basis, which doesn't comply with generally accepted accounting principles, profit missed the 13-cent average estimate from First Call.
``There are no drivers right now'' for sales, said Michelle Connell, who helps manage $75 billion at Wells Fargo Private Client Services, which owns Intel shares. ``The replacement cycle is getting longer and longer.''
Intel shares dropped $2.13 to $14.39 at 6:29 p.m. New York time after the earnings report. They fell as low as $14.25. The shares have lost almost half of their value this year.
Intel's gross margin, a measure of profitability given as the percentage of sales left after subtracting production costs, will be 49 percent this quarter and in the full year. The company had previously given a forecast of 51 percent ``plus or minus a few points'' for 2002.
Unused factory space that drove up the cost of production was the primary reason for revision, Bryant said on a conference call with investors. ``If you saw our revenue increase you'd expect to see a gross margin uptick,'' he said.
Savings From Cuts
Intel has yet to see much savings from reductions it's made to its workforce, Bryant said. The company in July said it planned to cut 4,000 jobs, or 4.8 percent of employees, after paring 7,000 positions last year. Bryant said Intel was on track to complete the cuts, mainly through attrition and voluntary severance, by the end of the year.
Sales from Intel's communications unit fell 17 percent to $482 million from the year-earlier quarter, as telecommunications companies such as WorldCom Inc. filed for bankruptcy. Chief Executive Craig Barrett is increasingly counting on the group to counter the effects of slowing PC growth.
Revenue in the U.S. was at the ``low end of expectations,'' largely because students returning to school didn't buy as many new computers as Intel had expected, President Paul Otellini said on the call. Latin American sales suffered from financial problems in Argentina and Brazil, he said.
In Asia, sales surged a record 20 percent from last year, Otellini said. Business from Intel's wireless group also helped bolster revenue, growing 15 percent to $586 million, largely on the strength of flash-memory sales, which are used to store phone numbers in cellular phones. Intel continued to take market share from competitors, Otellini said.
Spending
Spending on computer-related gear slipped in 2001 as businesses delayed purchases while their own profits dropped, and investors said they're again revising forecasts for when companies will start replacing PCs bought in the 1990s.
Intel reduced planned spending on new plants and equipment to $4.7 billion this year from $5 billion to $5.2 billion the company had budgeted.
That sent shares of semiconductor-equipment companies tumbling. Applied Materials Inc. fell as much as $1.27 to $11.78. Teradyne Inc. declined as low as $9.50 from $9.90. Novellus Systems Inc. dropped $2.33 to $23.80.
Lam Research Corp. fell as much as 62 cents to $8.70, and KLA- Tencor Corp. declined as much as $3.05 to $28.75. All of the stocks gained today before Intel's report.
Intel had acquisition-related costs in the third quarter of 2001 of $609 million. In the recent quarter, such costs declined to $108 million.
