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Technology Stocks : Intel Corporation (INTC)

INTC 33.62

-4.2%

Nov 20 3:59 PM EST

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To: Thomas J. Smith who wrote (85545)	7/13/1999 7:49:00 PM
From: Grandpa Joe	Read Replies (2) of 186894

Hi Guys: The CC was upbeat but INTC directed analysts to cut their Q3 earnings estimate from $0.58 to $0.52 according to Briefing.com: Intel (INTC) 65 3/8 -1/16: It is shaping up to be a weak year for Intel. The company reported Q2 EPS of $0.51, missing the First Call estimate by two cents. The revenue number was the problem for Intel this quarter. At the beginning of the quarter, the company expected revenues to be "flat to slightly down" from Q1; in fact, they fell a more-than-slight 5.0%. The earnings miss would have been much worse had it not been for the fact that gross margins held at 59% instead of falling, as had been expected. Cost improvements and manufacturing efficiencies offset the lower average selling prices that were the result of a shift to Celeron processors. The future looks much like the recent past for Intel. Q3 revenues are expected to rise only slightly from Q2, which is not that impressive given a seasonal tendency for revenues to rise better than 7% in Q3. Cost cutting will help keep margins high, however, which will in turn help to support earnings. But based on today's guidance, higher margins will probably not be enough to prevent Q3 earnings from missing current analyst estimates. The First Call estimate for Q3 was $0.58 prior to today's release, but Intel's guidance points to a number closer to $0.52. The problems for Intel are clear -- the market is moving rapidly to its lower price Celeron processor. The demand for ever higher processor speeds is not there, and the growth segment of the market is shifting to the low end. We have been arguing for more than a year that processor speed is the old paradigm and that Intel will struggle to remain a growth company in that environment. Today's earnings report gives us more confidence that this view is correct. INTC shares initially dropped 2 points in after hours trading, but subsequently rebounded to near unchanged. - GJ

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