Intel beats estimates, says growth may slow next quarter
By Michael Kanellos
Staff Writer, CNET News.com
October 17, 2000, 2:20 p.m. PT
update Intel beat lowered earnings expectations Tuesday, but the outlook for the fourth quarter looks like it could be disappointing.
The company reported net income of $2.9 billion, or 41 cents a share, for the third quarter, not including acquisition costs, an increase of approximately 52 percent over the same period a year ago. Revenue came to $8.7 billion, a record. Including acquisition costs, net income came to $2.5 billion, or 36 cents a share, up 72 percent from the third quarter of 1999.
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The numbers beat lowered expectations. The company was expected to report earnings of 38 cents a share, or roughly $2.7 billion, according to the consensus estimate from First Call/Thomson Financial, on revenue of approximately $8.6 billion.
Intel's earnings include $966 million from interest and investments, higher than the $900 million anticipated for the quarter. Excluding that amount, Intel still beat the revised estimates.
Still, it is unclear whether the results will make analysts cheer. In its statement, Intel said revenue would grow by 4 percent to 8 percent sequentially in the fourth quarter, lower than expected for the traditionally strong holiday period.
"That is probably half of normal," Needham & Co. analyst Dan Scovel said in an initial reaction to the report. Before the call, he predicted revenue growth below 10 percent sequentially would indicate a change in normal seasonal patterns.
Intel's revenue predictions "are a little bit less aggressive than the historical norm," added Nathan Brookwood, principal analyst at Insight 64. "They are getting conservative here."
Intel shares climbed slightly after the results were released. In regular trading, Intel gained 50 cents to close at $36.19; they climbed to $37.50 in after-hours trading, according to IslandECN, which tracks late trades on electronic networks.
Last year, Intel reported earnings of 28 cents a share (split-adjusted and excluding acquisition costs) on revenue of $7.3 billion, excluding acquisition costs.
On Sept. 21, the Santa Clara, Calif.-based chip giant surprised investors when it warned that revenue, and in all likelihood profits, for the third quarter would be lower than anticipated because of slowing PC sales. The announcement sparked a slide in both the company's stock and the market overall.
Although technology stocks have been relentlessly hammered in recent weeks, the PC market is not shrinking. In fact, annual unit shipments of PCs continue to grow around 15 percent. The problem is that unit shipments are not growing as fast as investors would like, and overall revenue is climbing at even a slower rate.
One of the major looming issues is how much the market will grow in the fourth quarter, traditionally the strongest quarter for PC sales.
Some analysts, such as Eric Ross of Thomas Weisel Partners, predict a fairly normal fourth quarter. For 2000, PC shipments should grow by 18 percent over last year, he wrote in a recent note. Others, however, have said rising oil prices and other factors could dampen holiday impulse spending. |
