Where's the doom and gloom in this.............Intel Earnings Rise 21 Percent
SANTA CLARA, Calif. (Reuters) - Intel Corp., the world's largest maker of
semiconductors, reported third quarter earnings that were slightly below analysts' estimates,
as the average price of its core microprocessors fell in the quarter.
But the company also forecast a ''seasonally strong'' fourth quarter, comments which could
help ease investor worries. In recent weeks, investors have been nervous that the recent
Taiwanese earthquake would have a negative impact on semiconductor makers and the
personal computer industry.
Excluding acquisition costs, Intel reported net income of $1.9 billion, or 55 cents a share, up
21 percent from the third quarter a year ago. According to First Call, the consensus among
analysts was for 57 cents a share.
''Average selling prices were down from the second quarter and a little lower than we
expected,'' said Intel chief financial officer Andy Bryant, in an interview. ''We did take
market share at the low end, which causes ASPs to be lower.''
Intel has been gaining market share at the low-end of the PC industry against rival Advanced
Micro Devices Inc. as the two companies have engaged in constant price cutting.
In after-hours trading, Intel's shares fell $5 to $71.25, traders said. Intel's shares closed at
$76.6875 Tuesday. Intel's results were released after the market closed.
Including acquisition costs, Intel reported net income of $1.46 billion, down six percent from
the third quarter of 1998's net income of $1.56 billion. Diluted earnings, including merger
costs, were 42 cents per share, down from 44 cents a year ago.
Revenues jumped nine percent to $7.3 billion in the quarter, from $6.7 billion in the third
quarter a year ago. Third quarter revenues include post-acquisition revenue of companies
acquired in the third quarter. Third quarter revenues were also up nine percent from the
prior second quarter.
Intel said that its gross profit margins were down slightly compared to the gross margins of
59 percent of revenues in the prior second quarter. Average selling prices of
microprocessors were down in the third quarter from the second quarter, but the company
was not more specific.
Intel said that shipments of microprocessors, chipsets, and flash memory chips all grew
substantially to new records during the quarter. Craig Barrett, Intel's chief executive, said
that Intel's core microprocessor business was ''solid.''
The chip giant also said that it looks forward to ''seasonally strong'' business in the fourth
quarter, with revenues in the fourth quarter up from third quarter revenues of $7.3 billion.
Gross margins in the fourth quarter are expected to be up a couple of points from the third
quarter.
''We forecast the quarter to be up, which includes our assessment of Taiwan,'' Bryant said.
''We talked to all the suppliers and our supply lines are in place. None of our customers
have said they are going to do anything different because of the earthquake. Right now we
are pretty comfortable that revenue will be up in the fourth quarter.''
Intel also said that capital spending for 1999 is now expected to be up to $3.3 billion, up
from the company's previous guidance of $3.0 billion. This is primarily due to the capital
spending of companies Intel acquired in the third quarter and the earlier-than-expected ramp
of its online services business, Intel's data center and Web hosting business.
In the third quarter, Intel completed its acquisition of networking chip maker Level One
Communications Inc. for $2.3 billion, in a stock-for-stock deal. The company also acquired
privately-held Softcom Microsystems Inc., a networking chip company which develops
chips for high-speed networks, in cash.
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