PCs have "been flying off retail shelves"
On 17% Gain in Quarterly Sales
Intel Beats Street Expectations
An INTERACTIVE JOURNAL News Roundup
Intel Corp. posted fourth-quarter earnings that blew past Wall Street
expectations amid strong sales of its Pentium microprocessors. But the chip
giant cautioned that first-quarter revenue would likely fall from the previous
period and that its strong profit margins are expected to narrow.
For the period ended Dec. 26, the Santa Clara, Calif., company said net
income rose 18% to $2.06 billion, or $1.19 a share, from $ 1.74 billion, or 98
cents a share, in the year-ago period. Analysts surveyed by First Call were
expecting a profit of $1.07 a share.
Revenue, meanwhile, rose 17% to $7.61 billion, up from $6.51 billion in the
year-ago period.
The strong earnings came amid robust sales for personal computers.
PCs have "been flying off retail shelves," said PaineWebber Inc. analyst John
Lazlo, adding that anecdotal reports indicate demand is spilling over into
January. After undergoing a tough industry slumps, the chip sector is "at the
front end of what could be a three- to four-year upcycle," Mr. Lazlo said.
Signs of the sector's improving outlook started surfacing last June, experts
said. By then, PC makers had cleaned up their inventories and were freed up
to order chips. Also, chip makers' capital-spending cuts wrung out the excess
supply that led to pricing pressure and profit declines.
In Tuesday's report, Intel said fourth-quarter expenses rose 16% to $1.6
billion from the third quarter as a result of incremental spending associated
with revenue- and profit-dependent expenses and higher-than-expected
utilization on the Intel Inside program. The fourth-quarter effective tax rate
was 33%.
Looking forward, Intel said it expects revenue for the first quarter of 1999 to
be down from fourth-quarter revenue due to seasonal factors. The company
also said that gross margins in the first quarter likely will fall slightly from
58% in the fourth quarter. Intel said its gross margin expectation for 1999 is
57%, plus or minus a few points, compared with 54% for all of 1998.
"Intel achieved its 12th consecutive year of revenue growth in spite of the
challenges of a turbulent market in 1998," Craig R. Barrett, Intel's president
and chief executive officer, said in a statement. "The investments of the last
year in new product development and productivity improvement have
strengthened the company and positioned it well for a market that will continue
to be competitive and dynamic."
After setting a new high Monday at $141.375, Intel shares saw modest selling
Tuesday and ended down $4.1875 at $135.5625 on the Nasdaq Stock Market
before climbing in after-hours trading. Betting on a resurgence in the chip
sector, investors had bid the shares up about $30 in the past month, helping
Intel's stock price more than double from its low of $65.656 last June.
On Monday, Lehman Brothers Inc. joined the legion of Intel supporters,
raising its 12-month price target by 33% to $180.
Intel's stock has benefited from bullish earnings outlooks from Morgan
Stanley Dean Witter & Co. and Prudential Securities Inc. Even Merrill Lynch
& Co. analyst Thomas Kurlak, who has been steadfastly bearish, last month
raised his investment stance on the stock. He said he believed the company
will be helped, not hurt, by the rising popularity of inexpensive personal
computers. |
