4. INTEL EARNINGS TUMBLE 77%
Chipmaker Intel (INTC, $24, unch.) met third-quarter earnings expectations, posting a net income of $660 million, or 10 cents a share. The figure, which excluded 5 cents a share in acquisition-related costs,
marked a 77% drop from the year-ago quarter, when Intel recorded profits of $2.9 billion, or 41 cents a share. The firm’s sales fell 25% versus the comparable quarter last year, from $8.7 billion to $6.6 billion.
TODD’S TAKE: Given the state of the economy and PC sales, everyone knew Intel was in for a tough quarter. Nonetheless, we saw a few bright spots in both third-quarter results and the firm’s future outlook.
First of all, although sales of computer, Wireless and communications chips all fell when compared with 3Q00 levels, sales across all categories increased from the second quarter. Intel’s price war with Advanced Micro
Devices (AMD, $9, down 1), meanwhile, sent margins down to 46%, but the price cuts also helped Intel increase its market share by about 1% from the second quarter. And the good news is that the company’s margins have probably bottomed out here.
Looking ahead, Intel surprised some with sales guidance for the typically strong fourth quarter in the $6.2-6.8 billion range. That is the same guidance it provided the last two quarters, and it’s a bit weaker than the average analyst estimate of $6.8 billion. With no one sure how consumers
are going to react to global and economic events, we can’t blame Intel for the cautious numbers. Still, with Windows XP coming, strong Pentium 4 market penetration and the holiday shopping season on the horizon, we think Intel has set itself up for a nice little upside surprise in the
fourth quarter. We expect the company to grow even stronger as we head into 2002. |
