INTEL Warns from Bloomberg for the archives:
Intel Says Fourth-Quarter Sales Will Miss Targets (Update4)
By Cesca Antonelli
Santa Clara, California, Dec. 7 (Bloomberg) -- Intel Corp., the world's biggest computer-chip maker, said fourth-quarter sales will miss its forecasts because of ``large cancellations by customers worldwide.''
Intel now expects sales to be little changed from the prior quarter's $8.73 billion. The company had predicted sales growth of 4 percent to 8 percent in the quarter, after posting lower-than- expected sales in the September period.
Gateway Inc., Apple Computer Inc. and other personal computer- related companies have reduced sales and profit expectations for this quarter and next year, citing sluggish personal-computer demand. That had prompted concern that Intel, which gets most of its sales from PCs, would fall short this quarter as well.
``I'm disappointed,'' said John Spytek, an analyst with Banc One Investment Advisors, which owns about 4.5 million shares. ``It's clearly disappointing given that Intel had already guided everyone toward lower revenue growth for the quarter.''
The shares of Intel dropped as low as $30 after the revenue outlook before recovering to $32.75. They rose 56 cents to $32.31 earlier in the day before trading was halted. The stock has lost 57 percent of its value since touching a record $75.81 in August, and is on track for its first annual decline since 1988.
`Uniform' Shortfall
Every Intel product line, except flash-memory chips -- from PC processors to networking equipment and chips -- saw lower-than- expected demand, Chief Financial Officer Andy Bryant said in an interview. The shortfall is ``pretty uniform'' across the Americas, Asia and Europe, he said.
``It truly is a situation where every place we're in worldwide and nearly every product line we sell'' will show slack demand, Bryant said.
He declined to comment on the outlook for the first quarter or next year, and wouldn't say which PC makers had canceled orders.
In the year-ago fourth quarter, Intel had profit excluding acquisition costs of $2.4 billion, or a pre-split 69 cents a share, on sales of $8.21 billion.
More Evidence
Evidence for an all-around bad quarter for PC-related companies is piling up. Apple, Gateway, Micron Electronics Inc. and others have cut sales targets. The price of memory chips, another indicator of PC demand, has fallen by half in the past three months.
Gateway reduced targets for the fourth quarter because its PC sales over the Thanksgiving weekend fell 30 percent from a year ago. Apple blamed an expected $600 million fiscal first-quarter sales shortfall on slack demand worldwide.
That led some investors to wonder when Intel would change its forecast. Many suspected it would cut its projections.
``It's a disappointment, but it doesn't come as a surprise,'' said Jerry Dodson, manager of the Parnassus Equity Income Fund, which owns 800,000 Intel shares. ``I didn't want it to happen, I hoped it wouldn't happen, but I suspected it might happen.''
Some investors said it could have been much worse.
``It's not as bad as I thought it was going to be,'' said Noah Blackstein of Dynamic Mutual Funds, which recently sold its position in Intel. ``I thought sales would go down. Flat's not so bad.''
China, Japan
Slack demand in Europe hurt the chipmaker's results last quarter, and the picture hasn't improved much since then. Though consumer PC sales in Japan and China remain ``brisk,'' demand is weak throughout the rest of the world, Intel Vice President Sean Maloney said on a conference call.
``In the past two or three weeks, we began to see increasingly negative signs for the fourth quarter,'' Maloney said.
Intel still sees gross margin, or the percentage of sales left after subtracting costs, at about 63 percent because it has cut costs in its factories. Expenses will be unchanged, rather than rising 6 percent to 8 percent as expected.
Capital spending for this year will be $6.5 billion instead of the $6 billion predicted earlier, because equipment suppliers are getting the chipmaker more tools faster than expected, Bryant said.
Flash, which stores data when devices such as cell phones and electronic organizers are turned off, escaped the slowdown. Intel also saw some strength in its chips for server computers that run corporate networks and Web sites. Investors said that's important since the company is preparing to introduce its powerful Itanium processor for servers.
``They'll get cracking again next year,'' Dodson said. ``By next year, sales will be growing again.''
Best Regards, J.T. |
