Intel expects to keep pace with second-half demand
By Nicole Volpe
NEW YORK, April 27 (Reuters) - Intel Corp. (NasdaqNM:INTC - news), the world's largest computer chip maker, on Thursday said it expected to meet a seasonal upswing in demand for its products in the second half of the year and detailed a push into new markets made possible by wider use of the Internet.
Chief Financial Officer Andy Bryant told Reuters that Intel ought to be able to keep up with rising demand in the second half as long as any increase is in keeping with the traditional growth trend between the first and second six months of the year. But there is no guarantee that will be the case, he said.
``I don't think we've seen what demand is. Right now we're tight across everything we make,'' he said before the company's annual meeting with analysts in New York. ``Right now we can meet a seasonally strong second half, but we have not commented on if the demand is stronger than expected.''
The issue is a thorny one for Intel, which has underestimated demand now for four quarters in a row, leading to difficulties in meeting orders.
``Trying to stay ahead of demand is a little like being Indiana Jones, running out of the cave with a giant boulder rolling behind you,'' said Ron Smith, general manager of Intel's Wireless Communications and Computing Group, said in an interview.
In reporting its first-quarter results last week, Intel reiterated its plan to boost its 2000 capital spending to $6 billion from a previous target of $5 billion and to expand capacity to make microprocessors -- chips that process information in personal computers -- to address the issue.
``A big chunk of this meets demand beyond this year,'' said Bryant.
During the meeting, Chief Executive Craig Barlett declined to comment on any future capital spending, though he said: ``I do have the sensation that the world has under-invested in silicon. We'll probably see strong spending industry-wide through '00 and '01.''
Intel has otherwise been investing to expand its presence in non-microprocessor, Internet-driven markets, largely through acquisitions. The company is looking to provide chips for networking, wireless devices and servers, which are computers that provide the backbone of the Web.
``They are expecting upwards of 50 percent growth in their communications business, although it becomes difficult to quantify how much of much of their business this could become,'' said PaineWebber analyst David Wong.
Intel said it is also expanding into areas such as electronic commerce services.
``The Internet is the mother of all drivers,'' Intel Chairman Andrew Grove told analysts.
Architecture Group Executive Vice President Paul Otellini said Intel was seeking new types of customers, including system operators, Web hosting companies, companies that build Web sites and dot-coms.
Intel will also begin shipping a new line of Intel-branded Web access terminals by mid-year, and is investing to create closer ties to software providers to tailor programmes for performance on Intel chips.
Some 1,000 Intel employees and more than $100 million would be invested in the software-related efforts, said Otellini.
Intel was on track with delivery of new chips, such as its Itanium processor, for use in servers, its low-powered PC Timna chip and its Willamette chip, which is the successor to its workhorse Pentium III product line, Otellini said.
They are all expected to be available for systems in the second half of this year.
The drive to new markets is part of a strategy to stay ahead of smaller rivals such as Advanced Micro Devices Inc. (NYSE:AMD - news), which has matched Intel's recent strides in achieving faster processor speeds.
Most of Intel's capital spending will also go toward investments in new chip-making equipment, rather than new facilities, as it moves to technology that creates finer line-widths between transistors on chips.
The company said it was on track to move 90 percent of its facilities to produce finer, 0.18 micron chips by year end. Moving production towards one chip design would help lower costs of production, and allow Intel room to manoeuvre in pricing against AMD. |
