Intel net income drops more than 80%

greenspun.com : LUSENET : Grassroots Information Coordination Center (GICC) : One Thread

Apr 18, 2001 - 12:29 AM

http://ap.tbo.com/ap/breaking/MGAVP4LKOLC.html

Intel Net Income Drops More Than 80 Percent

By Matthew Fordahl, The Associated Press

SAN JOSE, Calif. (AP) - Intel Corp.'s gloomy report that first-quarter profits plunged 82 percent included at least one ray of sunshine: sales of its computer processors appear to have stabilized after months of erosion and uncertainty.

Shares of the world's top supplier of semiconductors jumped more than 11 percent in after-hours trading Tuesday despite comments by executives indicating other areas of its business won't improve until the second half of this year.

"The recent feeling has been maybe the business was worsening," said James Ragan, an analyst for Crowell Weedon. "I think the comment that the PC business may have stabilized gives us a little more confidence that the year's going to improve from here."

For the three months ended March 31, Intel earned $485 million, or 7 cents per share, compared with the $2.7 billion, or 39 cents per share, the company earned during the same span last year.

Excluding acquisition-related charges, Intel earned $1.1 billion, or 16 cents a share, down 64 percent from last year's $3 billion, or 43 cents a share, the company said Tuesday.

Analysts were expecting earnings of 15 cents a share, according to a survey by Thomson Financial/First Call. Revenue for the period was $6.68 billion, down 16 percent from $7.99 billion last year, but slightly higher than what Intel had forecast.

Last month, the company said its first-quarter revenue would be off about 25 percent from the fourth quarter of 2000, when it earned $8.7 billion. It also said it would trim 5,000 jobs, or 6 percent of its work force, through attrition.

The company said it expects second-quarter revenue between $6.2 billion and $6.8 billion. Last year's second-quarter revenue was $8.3 billion.

Shares of Intel finished regular trading on the Nasdaq Stock Market at $26.04, off 26 cents - but rose to $28.97 in the after-hours session. Andy Bryant, Intel's chief financial officer, said the late first-quarter improvements in microprocessor sales - which account for 80 percent of business - suggest stabilization.

"We're not forecasting a snapback to last year's business levels," he said. "From a new, lower, stable business level, we see seasonality as the driving factor as opposed to macroeconomics." At the same time, Intel's gross margins will continue to suffer as the company pursues an aggressive strategy of cutting prices on its top-of-the-line Pentium 4 processor.

Earlier this week, Intel reduced prices by as much as 19 percent. Later this month, the Pentium 4 price is expected to fall as much as 50 percent, analysts say.

Intel's market share has been eroding - dropping roughly 1 percent in five of the last six quarters, according to Mercury Research. In the fourth quarter of 2000, Intel processors powered 81.5 percent of PCs while rival Advanced Micro Devices had 17.1 percent. In the first months of 2001, Intel's share fell to 77.3 percent and AMD's grew to 21.1 percent, according to preliminary research.

"The only lever Intel has to try to regain market share is price, and that's the weapon they're using," said Drew Peck, an analyst at SG Cowen Securities. The price cuts are not a response to the loss of market share, said Paul Otellini, executive vice president and general manager of Intel's Architecture Group. He would not release Intel's market estimates but said its shares have been stable.

Analysts believe Intel's biggest cut will involve its yet-to-be-released 1.7 gigahertz Pentium 4. It is expected to be initially priced around $700 when released Monday, and then cut to about $350 on April 29.

That would put the pricing in line with AMD's speediest processor, the 1.33 GHz Athlon. The pricing could result in high-end consumer PCs costing less than $2,000, which would have bought a machine half as fast six months ago.

The strategy could work for Intel in the long run, said Mark Edelstone, an analyst for Morgan Stanley. "It will add incremental pressure to near-term earnings, but Intel's strategy here is longer-term in nature," Edelstone said. "I think it will help to stimulate demand as the economy picks up later this year and into 2002."

On the Net:

Intel Corp.: http://www.intel.com

AMD Inc.: http://www.amd.com

AP-ES-04-18-01 0028EDT

-- Swissrose (cellier3@mindspring.com), April 18, 2001


Moderation questions? read the FAQ