Intel Plunges 19% in After-Hours Trading on Third-Quarter Revenue Warning
By Michael Brick
TheStreet.com/NYTimes.com Staff Reporter and Thomas Lepri
Staff Reporter
9/21/00 5:37 PM ET
Intel (INTC:Nasdaq - news), the world's leading semiconductor maker, warned late Thursday afternoon that its third-quarter revenue would fall short of forecasts, primarily because of weak demand in Europe.
The warning stunned Wall Street, and Intel's shares plunged 19% in after-hours trading.
The Santa Clara, Calif.-based company said it now expects revenue that is 3% to 5% higher than the $8.3 billion it reported in the second quarter.
That would result in revenue of $8.549 billion to $8.715 billion. Based on Intel's previous descriptions of market demand and gross margins, many Wall Street analysts had previously expected revenue of around $9 billion.
"Europe sometimes picks up a little later," said Jack Geraghty, analyst for Gerard Klauer Mattison, which has not done underwriting for Intel. He rates the shares a buy. "It looks like it didn't pick up quick enough for Intel to make its predictions."
Shares of Intel fell $11.60 to $49.88 in after-hours trading, according to Instinet. The company made its announcement after the stock market closed. The stock finished Thursday regular trading down $1.58, or 2.5%, at $61.48.
The company said it expects its gross margin percentage for the third quarter to be "62%, plus or minus a point, lower than the company's previous expectations of approximately 63% to 64%."
It also said interest "is expected to be approximately $900 million for the third quarter, up from the company's previous expectations of $800 million."
Tom Beermann, a spokesman for the company, declined to speculate on earnings for the third quarter. Analysts surveyed by First Call/Thomson Financial expected earnings of 41 cents a diluted share. Geraghty's model produced that figure, as well as revenue of $9 billion.
Geraghty said he believes demand in Europe is growing now, but he said other chipmakers may also warn of earnings or revenue shortfalls because the demand was slow for too long. Intel mostly supplies the PC business, he noted.
For investors, a pattern seems evident, Geraghty said: "You make most of your money in technology from October through March."
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