Intel CEO delays expansion due to economic woes
By Steven Scheer
JERUSALEM, June 18 (Reuters) - Intel Corp (NasdaqNM:INTC - news) chief executive Craig Barrett said on Monday that a deceleration in the global computer industry had put off a decision on whether to build a new chip plant in Israel.
``We have not made a decision to go forward for economic reasons,'' Barrett told reporters in Jerusalem. ``There is a slowdown in the industry and that's tempered the need for expansion. But we are still evaluating our options.''
Intel, the world's largest chip maker, said earlier this year it was considering building a new $3.5 billion chip plant next to its current facility in the southern city of Kiryat Gat and the Israeli government had said it would provide Intel with a grant to help finance the plant.
But on Monday Barrett said: ``It's a difficult time in the high-tech industry and the computer industry is decelerating... We think there will be a recovery by the end of the year but no one knows for sure.''
He said that the soon-to-be-released XP operating system from Microsoft (NasdaqNM:MSFT - news) could help revive computer sales.
``It may give a boost in the second half of the year,'' Barrett said, adding that whenever Microsoft released a new product with an advertising blitz, ``it has the possibility of boosting the industry''.
Barrett said consolidation in the computer industry would continue, with middle-tier companies suffering the most.
``It appears that top multi-nationals are gaining market share at the expense of smaller brands,'' he said. ``The mid-tier multi-nationals, such as Micron, are seeing a decline while Compaq, Dell and Hewlett Packard are gaining market share overall.''
The global slowdown has hurt Intel, which last week reiterated that sales in the second quarter would be at the low end of expectations of $6.2 billion to $6.8 billion, a decline of as much as 25 percent from $8.3 billion a year earlier.
INTEL CUTS IT LOSSES
Barrett said the company was still on track to reduce its head count -- mainly through attrition -- by 5,000 people by the year end.
``Until the economy picks up, it would be prudent to keep control of our expenses,'' he said.
Citing a ``quiet period'' ahead of its second quarter results on July 17, Barrett declined to discuss the company's near-term outlook. But he said Intel was armed with $7.5 billion to invest in new companies and technologies and was still looking for acquisitions.
``We are still looking to enhance our offerings and invest in networking and communications companies,'' Barret said.
Intel plans to invest in next generation processors and move from eight-inch to 12-inch wafers, he added.
``The way to emerge from a recession is with new products,'' Barrett said. ``I look to the future of high-tech and I have to be positive about it.''
He pointed to the Internet as a good example. ``There will be one billion users in a few years,'' he said, adding that Internet usage in Latin America, Eastern Europe, Africa and Asia was still low.
Barrett said that while it was difficult to predict the next big growth area, it would likely be in the upgrade and improvement of Internet architecture -- one of Intel's main strategies.
Intel's Israel plant, which manufactures the Pentium IV and 150 other chips, exported more than $2 billion of orders in 2000.
Barrett said Israel was still in with a good shot at a new plant if expansion returned to the agenda. Israel was attractive because of its strong background in engineering and technology.
He said Intel was looking at other sites, and would evaluate a range of conditions -- financial and political -- but he said the current instability between Israel and the Palestinians was not troublesome.
``This is a long-term investment,'' he said. ``We don't get bothered by short-term issues.'' |
