Tuesday June 3 5:38 PM EDT
Intel not too upbeat,some PC slowing seen-analysts
NEW YORK, June 3 (Reuter) - Intel Corp's yearly analyst meeting was not seen as very upbeat by some on Wall Street on Tuesday and several analysts said that they were now more concerned about a
coming slowdown in the PC sector, instead of ongoing product transitions at the world's largest semiconductor maker.
Last Friday, Intel said that its second quarter earnings would be below Wall Street expectations, due to weaker than anticipated demand, especially in Europe. Some analysts had cited its transition to new
products as the key factor.
``It looks like there is some overall slowdown and whatever it is, it's magnified in Europe,'' said David Wu of ABN/Amro.
``If it was just a product transition, why should Europe be the weakest, they are always the last to move to new products,'' Wu added.
Intel said earlier that it was comfortable with Dataquest Inc estimates for worldwide PC unit growth rates of 17 percent on a compounded annual growth rate until the year 2000 and its executives said they had no information to change their views of current market research forecasts for PC growth rates.
But executive vice president Paul Otellini told the analysts' meeting that it was ``too early'' to tell whether a steeper-than-expected decline in its second quarter European sales would translate into a European PC slowdown.
Otellini also said that he did not agree with some of the views on Wall Street that Intel's lowered second quarter expectations were due to its product transitions.
``I'm not sure I subscribe to the transition theory,'' Otellini told analysts. He said Intel's lowered expectations were due to lower than anticipated revenues, particularly in Europe, but it is seeing strong
demand for new products.
Intel is in the midst of one of its biggest product transitions to new processors, and sales are moving away from its classic Pentium chips to its new multimedia Pentiums with MMX technology and to its
new Pentium II processors.
``There was a more cautious tone to this meeting than last year,'' said Bill Milton, a Brown Brothers Harriman analyst. ``There has got to be more going on here than a product transition....I think there is a general slowdown in the PC market worldwide, particularly in Europe.''
Milton said that even though PC leaders such as Compaq Computer Corp (CPQ) and Dell Computer Corp (DELL) have not seen any such slowdown in PCs, he said these companies are gaining share at the expense of other PC makers.
The PC industry typically goes through a slowdown in the summer ahead of big pickup in volume in the fourth quarter. Milton said it has been eight years since Intel has seen a sequential quarterly revenue drop of 10 percent. Friday, Intel projected its second quarter revenues would fall between five and 10 percent from first quarter revenues of $6.4 billion.
Analysts also pointed out that Intel executives talked about stepping up marketing activities in emerging markets such as China, Vietnam, Indonesia, Thailand, India and others, in an attempt to create new
demand for PCs.
However, some analysts still said its product transition is Intel's biggest issue. Intel said by the fourth quarter, 90 percent of microprocessor revenues will come from new chips.
Michael Gumport, a Lehman Brothers analyst, said in a note to clients that Intel's ongoing transition to new process technology and product transitions to the new generation Pentium will take well over one
year to execute.
As Intel is introducing new chips, it is also moving to a new manufacturing process, using 0.25 micron technology, which enables more transistors to fit on a semiconductor die.
``The clearer assumption that process and product transitions will take well over one year to execute suggest that a substantial portion of Intel's product line will remain exposed,'' Gumport wrote. |
