The glass is half full.........Intel
Addresses recent problems
By Marcia Savage Santa Clara, Calif.
8:13 PM EST Tues., Oct. 12, 1999
Despite recent pricing pressures and some unanticipated
bumps in its road map, Intel Corp. expects to end the
year on a high note.
The chip maker, based here, posted third-quarter
earnings Tuesday that fell slightly short of Wall Street
expectations. But Intel executives said they expect
revenue for the fourth quarter to be up from the third
quarter.
"We expect strong seasonal demand for all products,"
said Andy Bryant, Intel's senior vice president and chief
financial officer in a conference call with analysts
Tuesday.
Average selling prices were lower than expected, citing
Intel's gain of market share in the low-priced processor
segment and the delayed introduction of the
high-performance Pentium III chips produced on
0.18-micron process technology, Bryant said.
The company's recent acquisitions also put pressure on earnings.
Intel acquired four companies during the third quarter: Dialogic Corp., Parsippany, N.J.;
Level One Communications Inc., Sacramento, Calif.; Softcom Microsystems Inc.,
Fremont, Calif.; and NetBoost Corp., Mountain View, Calif.
Including acquisition-related costs, Intel said its net income was $1.5 billion or 42 cents
per diluted share on revenue of $7.3 billion. That compares with net income of $1.6 billion
or 44 cents per diluted share on revenue of $6.7 billion posted for the year-ago quarter.
Excluding acquisition-related costs, net income was $1.9 billion or 55 cents per diluted
share. That result missed by 2 cents analysts' consensus estimate of 57 per diluted share,
according to First Call Corp.
Acquisition-related costs included $333 million in one-time charges and $121 million of
amortization of goodwill and other intangibles.
"On a geographic basis, demand remains strong," said Paul Otellini, executive vice
president and general manager, Intel Architecture Business Group. "At this point, we
believe our supply of materials from Taiwan-based manufacturers is not impacted."
Otellini spent some time Tuesday addressing some of Intel's recent problems, including
the last-minute cancellation of the Rambus-supporting 820 chipset due to a technical
problem.
The company is continuing "validation activity" on the chipset. Intel expects to ship the
chipset sometime in the fourth quarter, he said.
Otellini added that none of the upcoming Coppermine chips produced on 0.18-micron will
be stalled due to the 820 delay.
Problems with its most recent Pentium III Xeon chips has been resolved, he said. The
flaw showed up in eight-way servers using 550MHz Xeons with 512Kbyte or 1Mbyte of
Level 2 cache with Intel's Saber motherboard.
Asked whether Intel's recent troubles, from the delayed Merced to the 820, were random
or representative of a systemic problem, Otellini said he preferred to call them random.
The Merced problem was related to the complexity of the 64-bit project, and occurred
over a year ago, he said. Since then, Intel has been on schedule for producing the chip in
mid-2000.
As for the 820, he said: "The problems are fundamentally tied up in our ability to debug a
new technology between us, Rambus, our OEMs and board suppliers. That's a very
complicated technology. Moving to the next generation is always a little more difficult
than people give us credit for," he said.
Overall, Intel is moving its road map faster than it has in the past due to competitive
pressures and market demands, he said.
"I believe we've put in place corrective actions in our engineering teams to be able to do
a better job of hitting our commitments internally and to our customers," Otellini said.
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