Stabilizing Intel CPU Shipments Raise PC Recovery Hopes
By DONNA FUSCALDO Of DOW JONES NEWSWIRES
April 17, 2001
NEW YORK -- Intel Corp.'s (INTC) comments that microprocessor shipments stabilized in the first quarter were interpreted by some analysts and many investors to mean that the worst is behind the chip maker.
The most important thing for Intel is its CPU business, so if that business has stabilized, it is "step one to a recovery," said Jack Geraghty, an analyst at Gerard Klauer Mattison.
While Intel may have been "coy" by saying it expects regular seasonal patterns for its CPU business, if one reads between the lines, that means "business gets better, folks," said the analyst.
After the close of regular trading Tuesday, Intel, Santa Clara, Calif., posted first-quarter earnings that beat reduced expectations by a penny. While the company said second-quarter gross margins will be lower than in the first quarter, Intel noted that microprocessor shipments stabilized in the just-ended quarter.
The news sent Intel's stock up to $29.00 in after-hours trading, according to Reuters Instinet. Shares of Intel finished the regular trading session at $26.04.
Eric Rothdeutsch, an analyst at Robertson Stephens, said that Intel's CPU comments probably indicate that the worst is behind the chip maker, but he added that the next couple of quarters will still be challenging.
He pointed to Intel's gross-margin forecast as evidence of the tough time ahead.
"Pricing is a problem, and the Pentium 4 ramp is also a problem," said Rothdeutsch, explaining that Intel still doesn't have a chipset for the Pentium 4 that works with dynamic random access memory other than Rambus Inc.'s (RMBS) chips.
Rothdeutsch said Intel wasn't "stretching" in its assessment that CPU shipments are returning to more-regular patterns.
"If you look back for the last ten years, the second half was always stronger, even when times are tough," he said. "To expect the second half to be better than the first half is in line with history."
The analyst said he will cut his projections of Intel's results but will maintain his long-term rating of attractive on the chip maker's stock.
But at least one analyst wasn't so optimistic about Intel's recovery prospects.
While Drew Peck of S.G. Cowen admitted that "for those looking for a true gloom-and-doom scenario (Intel's microprocessor comments) may be a surprise," he questioned the disconnect between stabilizing shipments and Intel's deteriorating margins.
"We've seen a precipitous decline in the company's margins, and it doesn't look like it will recover," he said.
Peck, who had forecasted second-quarter gross margins of 53%, said that based on Intel's comments on microprocessor shipments, investors may think things won't get worse. The reality, however, is that "these margins don't represent a low point in the (chip) cycle, but represent what is typical of the microprocessor business in the next five years," said Peck.
Intel said Tuesday that gross margins in the second quarter would come in at 49%. In the first quarter, gross margins were 51.7%. |
