edit-Ashok Kumar was saying tool spending up 20 %..whenever stats are thrown up like that one must ask..relative to what?.
Actually article says..even the percentage of shrunk capex on tool spending is the same !..Ashok was mentioning 300 mm wafers after the mention of the supposed 20 % increase..so maybe that was it. Ah! details left to the trash bin.
previous comments...
That 20 % increase is relative imo to a shrunk overall capex budget..basically flat tool spending and hence the action of AMAT etc ahrs. I was thinking it did not make sense for those to trade down the way they did, in face of that seemingly bullish news. QQQ was up via INTC and maybe MSFT..but other SOX drivers were down.
Who knows what games during this opex week.
"..There was another letdown, too: Investors were hoping that within Intel's overall capex budget, it would announce a planned increase in spending on equipment relative to bricks and mortar, because it spent heavily to build fabs in Oregon and Ireland last year. But the company said it plans to spend about 75% of its budget on equipment, the same as last year. "
Read this
thestreet.com
From The Street.com
K.C. Swanson
Intel Turns It Up a Notch
By K.C. Swanson
Staff Reporter
01/14/2003 08:03 PM EST
URL: thestreet.com
Updated from 7:39 p.m. EST
Given all the jitters over holiday PC sales, Intel (INTC:Nasdaq - news - commentary) emerged from its fourth quarter looking remarkably unscathed.
The chipmaker handily beat guidance and expectations for the period, on Tuesday reporting a 10% quarterly increase in sales and surpassing earnings estimates for the fourth quarter of 2002.
The takeaway for equipment makers wasn't so cheery, because Intel said it plans to cut its capital spending budget for 2003 by as much as a third.
In after-hours trading, Intel shares took the good news in stride: The stock was up a modest 15 cents, or 0.8%, to $17.94, on top of its 2.4% gain in the trading day.
Meanwhile, equipment makers were under pressure after hours. Applied Materials (AMAT:Nasdaq - news - commentary) lost 72 cents, or 4.7%, to $14.64; Lam Research (LRCX:Nasdaq - news - commentary) was down 55 cents, or 4%, to $13; Novellus (NVLS:Nasdaq - news - commentary) was off $1.28, or 3.8%, to $32.17; and KLA-Tencor (KLAC:Nasdaq - news - commentary) had lost $1.58, or 4%, to $38.07.
After the close, Intel reported that fourth-quarter sales totaled $7.2 billion, up 3% from last year's levels.
Sales came in well above the company's own guidance of last month: On Dec. 5, Intel had predicted revenues would fall between $6.8 billion and $7 billion. Splitting the difference, Wall Street analysts were looking for revenues of $6.9 billion and earnings of 14 cents, according to Thomson Financial/First Call.
Fourth-quarter sales growth pushed gross margins up to 51.6%, an impressive gain from third-quarter levels of 49%.
Intel's fourth-quarter profit doubled from last year's $504 million to $1 billion, amounting to earnings of 16 cents a share.
Operating income in Intel's core processor business, which accounts for 83% of revenues, grew 42%, but the wireless division saw its loss deepen to $98 million from last quarter's loss of $30 million. The communications arm narrowed its loss to $168 million from $177 million in the third quarter.
According to the company, unit shipments of microprocessors set a record, while chipsets and flash memory units both saw sequential growth. Intel also said it believes it gained share in microprocessors, chipsets, graphics, motherboards, flash, PDA microprocessors and LAN-on-motherboard gigabit Ethernet connections.
"Though the buzz on the Street was that they might beat by a little bit, what was surprising was not only that they gained market share, but that they did record volume for the year," said Graham Tanaka of Tanaka Capital, whose firm owns shares of Intel. "The higher volume we are seeing is not only a function of the U.S. economy, but of continued growth in Asia and now a pickup in Europe. Japan's picked up too in IT spending. And with [ongoing] reasonable growth in the U.S., this kind of thing could produce continued outperformance."
Still, Intel management remained cautious in its economic outlook. President Paul Otellini noted that relative strength in laptops and servers suggested some degree of demand on the corporate side relative to consumers, and observed that growth in average selling prices also implied corporate demand was good. But he added, "What we've seen with corporate purchases has been anecdotal; it's not a clear pattern that has emerged. We [also] saw some upside in December in Europe with corporate purchases. These are points of light, though nothing that we would say indicates a clear pattern."
On a more upbeat note, he reminded analysts, "When you look at the installed base [of PCs] , it is aging," suggesting that companies will need to invest to upgrade their stock, hopefully starting this year.
In response to a question from Lehman analyst Dan Niles, Otellini agreed it's possible that Microsoft's decision to stop support of Windows 98 this June could potentially drive more companies to begin upgrading. "I think every company has to answer on their own," he said. "But it was a factor in Intel's decision to buy quite a few PCs starting this year."
Despite the relatively strong fourth-quarter numbers, some analysts remained skeptical.
"I still think there's an inventory build, both in cell phones and PCs," said Woody Calleri, an analyst at Midwest Research who believes PC sales fell below the number of units built. On the call, Intel said it saw strength from European distributors late in the quarter, he pointed out. "That's exactly how the PC channel got stuffed last year; they had stuffed the channel in Europe, where there are more small distributors."
Because management declined to say it was seeing a pickup in economic growth, said Calleri, "There was nothing to make me think the stock should rally here. On the other hand, until I'm proven right on the inventory build, I think the stock will just drift."
As expected, Intel gave a wide range of revenue guidance for the quarter now under way, saying sales are likely to fall 3% to 10% to between $6.5 billion and $7 billion. Gross margins are expected to decline to 50%, plus or minus a couple of percentage points.
For 2003, Intel expects margins to hover around 51%.
Meanwhile, Intel confirmed suspicions that it would cut its capital expenditure budget, though some optimists were hoping it would keep spending flat with last year's levels. For 2003, Intel expects capital spending to be between $3.5 billion and $3.9 billion, down from $4.7 billion in 2002.
At Morgan Stanley, equipment analyst Steve Pelayo called Intel's capex estimate "quite a disappointment," noting that he'd anticipated spending in the range of $4.2 billion, while the market had reckoned on a range of $3.5 billion to $4.7 billion. Clearly, guidance fell at the low end.
There was another letdown, too: Investors were hoping that within Intel's overall capex budget, it would announce a planned increase in spending on equipment relative to bricks and mortar, because it spent heavily to build fabs in Oregon and Ireland last year. But the company said it plans to spend about 75% of its budget on equipment, the same as last year.
"They didn't even throw us that kind of bone," said Pelayo. "This will probably weigh heavily on the equipment stocks."
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