O.T. Intel news ( Rambus related) ???
Mercury News
8:12 p.m. PDT Tuesday, October 12, 1999
Intel earnings not good enough
BY TOM QUINLAN
Staff Writer
Despite a 21 percent increase in operating profits, Intel Corp. failed to meet analysts' expectations Tuesday for third-quarter earnings, sending its shares down as much as 8.7 percent in after-hours trading.
The Santa Clara-based chip giant attributed the shortfall to delays in shipping its newest high-end Pentium III chips and to lower profit margins on its other semiconductor lines.
On sales of $7.33 billion, Intel racked up earnings of $1.9 billion, or 55 cents per share, excluding effects from the acquisition of a number of communications chip companies during the quarter.
According to First Call, Wall Street analysts were expecting the company to post operating earnings of 57 cents per share in the quarter, which ended Sept. 25.
Including all one-time factors, Intel earned $1.46 billion, or 42 cents a share. In the year-ago quarter, Intel earned $1.56 billion, or 44 cents share.
Intel executives said they were pleased with the third-quarter results, which roughly met their internal projections and were significantly better than the company's year-earlier results.
''This is a strong, solid third quarter,'' said Paul S. Otellini, executive vice president and general manager of Intel's Architecture Business Group.
But company executives acknowledged that profit margins were lower than expected, and the average selling price of its chips continued to fall.
Intel's earnings were released after the stock market's close Tuesday. In Nasdaq trading, Intel shares closed at $76.69, up 19 cents. But in after-hours trading, shares traded as low as $70.
Intel's results were surprising, given that a number of computer-related hardware companies, including Seagate Technologies Inc. and Novellus Systems Inc., have recently posted results that were much better than expected. Generally, Intel's performance is seen as the leading indicator for the high-tech industry.
''Given the fact that a number of companies have posted strong results for this quarter, I think Intel is an anomaly this time around,'' said Morgan Stanley Dean Witter analyst MarK Edelstone.
Edelstone, who had projected Intel's third-quarter sales and earnings would come in at $7.4 billion and 60 cents a share, said the results were ''obviously a slight disappointment.''
''But the outlook is pretty good,'' he added. ''The product road map looks solid.''
Edelstone said Intel's shortfall was caused by problems in getting its most advanced processor out to the market rather than fundamental weakness in Intel's business.
Intel blamed its difficulties on problems putting a new, more efficient manufacturing process in place. The company had planned to start shipping smaller, more powerful chips made using a 0.18 micron process in August.
Instead, Intel won't be shipping that product line -- codenamed Coppermine and running at 650 MHz, 700 MHz and 750 MHz -- until Oct. 25.
''I think if Intel had had those products in the market when they originally planned, the shape of this quarter could have been a lot different,'' said Gregory Mischou, an analyst for Warburg Dillon Read LLC, who continues to rate Intel a ''buy.''
Separately, the company also announced Tuesday that it would work with the American Medical Association to create a service that would let authorized doctors to access patient records over the Internet.
In many ways Intel's earnings reflected the somewhat topsy-turvy nature of the quarter for the company as a whole.
The successful acquisition of a slew of communications chip companies helped pave the way for Intel's introduction of a network processor chip that gives the company a strong entry into the market for telecommunications products -- one of the fastest-growing markets for semiconductors.
The company also scored a number of wins in the nascent market for cable set-top boxes by winning processor supply contracts from Hughes Network Systems, NEC Corp., Pacific Century Group and on Tuesday, Nokia Oy.
In addition, Intel strengthened its Internet offerings with Intel OnLine Services Inc., a Web hosting service that will be marketed directly to business customers who want to set set up e-shops on the Web.
However, the company also had its share of setbacks during the quarter. Even as it was entering the market for a stand-alone network processor, it acknowledged that it was abandoning the market for discrete graphics chips that it entered last year.
Intel was also hurt at the high end of the processor market when design problems prompted computer companies to delay shipping machines that used as many as eight Pentium III Xeon processors in a single box.
More recently, Intel had to delay the introduction of a new chip set using a new memory design from Rambus Inc. when some PCs using the chip set didn't work properly. |
