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Intel reports second quarter profit
July 15, 1997 09:12 PM
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By Sam Perry
PALO ALTO, Calif., July 15 (Reuter) - Semiconductor maker Intel Corp.
INTC reported sharply higher second-quarter profits on Tuesday despite a
drop in demand for some of the company's older-generation products.
In a statement issued after markets closed, the Santa Clara, Calif.-based
maker of microprocessors and other computer products reported net
income of $1.6 billion, or 92 cents a share, compared with $1.0 billion, or
59 cents a share, a year ago. The per share figures for both periods reflect
a 2-for-1 stock split that took effect earlier this week. Revenues rose to
$6.0 billion from $4.6 billion.
The earnings figure topped analysts' consensus estimate of 90 cents per
share and was well above Wall Street's recent "whisper number" circulating
around trading rooms that the result could be a few pennies a share weaker
than that.
As the company had warned on May 30, revenues and earnings during the
seasonally slower second quarter were down from the first quarter due to a
combination of weakness in Europe and the introduction of new
microprocessors.
"Strong microprocessor shipments in the first quarter led to some inventory
correction in the second quarter as the industry prepared for a rapid
transition to (Pentium) processors with MMX (multimedia) technology,"
Intel Chairman Andrew Grove said.
Intel said it expects third-quarter revenues to be unchanged to slightly
higher than the $6.0 billion in revenues it posted in the second quarter,
while gross margins would be flat to slightly lower than the second quarter's
61 percent.
Intel's 1997 capital spending estimate remained at $4.5 billion, and the
company still expects to maintain gross margins of about 60 percent for the
full year.
"It doesn't look bad," said C.B. Lee, an analyst at Sutro & Co. But he also
said that, based on an initial review, analysts will reduce earnings per share
estimates for the September quarter.
The company expects about $140 million in interest and other income for
the third quarter, down from $212 million in the second quarter, Lee said.
The company said it bought back a total of 13.0 million of its common
shares at a cost of $945 million.
Intel Chief Financial Officer Andy Bryant told Reuters the company has
continued to buy back shares as part of an ongoing program.
"We believe a good use of the cash is to buy back our own stock. We
think it's a pretty good investment," he said.
Intel had warned investors on May 30 that it expected results in the second
quarter to fall short of its previous expectations.
Intel's results follow statements of weaker-than-expected results from chip
makers Advanced Micro Devices Inc.AMD and Cyrix Corp.CYRX ,
which are beginning to compete with the company for the first time in years.
Like Intel, those chip makers are also dealing with a rapid shift to
newer-generation microprocessors and feeling pricing pressures on their
older computer chips, which are being phased out.
Intel chief Grove has described the product transition as "monumental" and
recently estimated that by the fourth quarter about 90 percent of Intel's
microprocessor revenues will come from its Pentium with MMX multimedia
technology and new Pentium II processors.
"Demand for the Pentium processor with MMX technology and the
Pentium II processor is strong, and we are ramping up production at a
record rate," he said Tuesday.
Shares of Intel rose to $81.50 in after-hours trading. The stock closed up
$2.15625 at $80.90625 on Nasdaq.
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