Intel Beats Wall Street Estimates
As Chip Shipments Set a Record
An INTERACTIVE JOURNAL News Roundup
Intel Corp. reported relatively flat earnings for its latest period Tuesday, but
the results were much better than even the most bullish expectations amid
strong world-wide demand for personal-computer products and record
processor shipments.
The Santa Clara, Calif., chip behemoth reported net income for the third
quarter ended Sept. 26 was $1.56 billion, or 89 cents a diluted share, virtually
unchanged from $1.57 billion, or 88 cents a share, in the year-ago period.
That topped not only the consensus estimate of analysts surveyed by First
Call for net income of 80 cents a share but also "whisper numbers" making
the rounds on Wall Street before the report's release.
Revenue, meanwhile, jumped more than 9% to $6.73 billion from $6.16
billion in the year-earlier quarter.
Intel said it also set a record for quarterly
revenue in the period, helping the company
surpass Wall Street's estimates.
"We are pleased with our overall performance in the last quarter," said Craig
Barrett, Intel's president and chief executive officer. "We had growth across
nearly all of our geographies and product lines, including strong
microprocessor sales."
Mr. Barrett said that the development and introduction of the Xeon chip for
servers and workstations and the Celeron chip for low-cost PCs also helped
the company.
Intel shares fell $1.875 to $83.5625 on the New York Stock Exchange
Tuesday. The earnings report was released after the close of trading.
Because Intel makes about 85% of the world's PC microprocessors, its
results are considered a leading indicator of global demand for PCs. Fearing
the impact of recessions in Japan, the rest of Asia and other parts of the
world, investors have punished the stocks of leading PC makers, chip
makers and their suppliers in recent months.
Intel has fought to combat increased competition, the industry shift to
low-priced PCs and an antitrust probe by the Federal Trade Commission.
Intel also said it continues to make progress in lowering manufacturing costs.
During the quarter, the company announced addition staff-reduction plans
for 1999, including the elimination of about 675 manufacturing positions at a
plant in Hudson, Mass., and 500 to 700 manufacturing positions in Puerto
Rico.
Intel surprised investors Sept. 10 when it announced that third-quarter
revenue would come in ahead of expectations. The company said sales
would rise 8% to 10% from the second quarter, when revenue totaled $5.93
billion.
Intel tends to be conservative when it makes such announcements, which
gave Wall Street more confidence that the company would exceed the
forecast, Donaldson Lufkin & Jenrette Securities Corp. analyst Charles
Boucher said prior to the announcement.
Analysts said the company appears more sure-footed now than it has in at
least a year, when the sub-$1,000 PC began to threaten its command of the
chip market. Intel has lost market share in the low-end consumer market
and its sales growth has slowed, but there is a sense that the company is
dealing more effectively with the changes in the market.
"I think the company is feeling more confident with its outlook and its
product road map than in the last year or 18 months," Mr. Boucher said. "
They obviously struggled with the transition in the consumer marketplace to
lower-cost PCs."
The company now has a more viable low-cost chip in the revamped Celeron,
and its Xeon chips for technical computers are bringing in higher profit
margins, analysts said.
In the third quarter, the company repurchased a total of 20.1 million shares
of common stock at a cost of $1.7 billion. The company has repurchased a
total of 64.4 million shares at a cost of $5.2 billion year to date, and has
repurchased 277.8 million shares at a total cost of $12.1 billion since the
program began in 1990.
Separately, Intel officially announced Tuesday that it will launch its Katmai
and Tanner brands of microprocessors in the first quarter of 1999. Both will
initially run at 450 to 500 Megahertz, and compete with the new K7 chip
from Advanced Micro Devices Inc. AMD has come close to matching
Intel's performance in the past, only to stumble because of delays in
perfecting technology or production processes. Its current K6 chip has
lagged behind Intel's fastest chips by three to six months. |
