Intel CEO: Corporate Buying Rebounds
Thursday November 20, 7:31 pm ET
By Caroline Humer
Reuters
NEW YORK (Reuters) - Intel Corp.'s (NasdaqNM:INTC - News) chief executive said on Thursday that corporations are starting to buy more technology, in what were some of the most optimistic comments yet from the chipmaker about a recovery.
"So, (there are) indications around the world of a regrowth in IT," CEO Craig Barrett said. "We've seen some sprinkling signs of that, but I don't expect a major, major upgrade cycle. I do think we'll see increased investment in the U.S. going forward."
The comments were slightly more positive than those in October from Intel Chief Financial Officer Andy Bryant, who expressed caution over the pace of corporate technology spending while saying consumer spending was picking up.
The comments are similar to those from other technology executives. Hewlett-Packard Co. Chairman and Chief Executive Carly Fiorina said on Wednesday, "We were not counting on a huge improvement in demand in the enterprise space, but I think it's fair to say that people are becoming increasingly optimistic."
On Thursday Barrett told investors at an analysts' meeting that he saw "indications around the world of a regrowth of information technology." Governments in Asia and Europe were starting to invest in their technology infrastructure, he said.
Barrett also said he was looking forward to "relatively robust growth" in the semiconductor industry after a three-year downturn.
Intel, whose microprocessors run four out of every five personal computers, is a bellwether for technology spending. Shares fell 69 cents, or 2 percent, to $31.83 on the Nasdaq on Thursday, while the broader Nasdaq composite index (NasdaqSC:^IXIC - News) fell about 0.9 percent.
The Santa Clara, California-based company expects to reduce cost per die -- a key measure of production costs -- by 25 percent in the fourth quarter versus a year ago. Intel has gained ground against its rivals by seeking more efficient chip production.
A die is an unpackaged, bare chip and represents the majority of the cost of producing a microchip, which also has separate assembling and packaging costs.
Bryant said on Thursday that greater demand has allowed Intel to cut costs more than expected over the summer, when a tech rebound was not yet in sight.
"Cost is better because of fuller factories," he said.
Intel expects to cut those costs by another 25 percent over the next two years.
The company said it was on track to ship more than 100,000 Itanium processors in 2003, which investors said was more than they had expected.
Itanium processors are based on a 64-bit design, enabling them to process more data at once than common 32-bit chips. They are used in computers sold by Hewlett-Packard Co. (NYSE:HPQ - News), Silicon Graphics Inc. (NYSE:SGI - News), China's Legend Group Ltd. (HKSE:0992.HK - News) and Unisys Corp.(NYSE:UIS - News)
TOO MUCH CHIPMAKING CAPACITY?
One institutional investor said he believes Intel may now be running out of chipmaking capacity. That is in contrast to the past several years, when the chipmaking industry was in its worst-ever downturn and had to close factories.
"They sounded very optimistic and bullish too. I think they are very happy and satisfied," said Graham Tanaka of Tanaka Capital Management.
Barrett repeated the company's forecast for double-digit growth in revenue and earnings per share in the fourth quarter.
In October, the company said that it expected fourth-quarter revenue of $8.1 billion to $8.7 billion. Analysts currently expect revenue of $8.5 billion, an increase of 18 percent from a year earlier, according to Reuters Research, a unit of Reuters Group PLC.
Analysts see earnings nearly doubling to 29 cents per share.
During the meeting, Chief Operating Officer Paul Otellini said the company had shipped more than $2 billion worth of Centrino mobile chips during the first nine months of the year.
He also said the company would try to win more business from phone makers, which use its mobile chips and flash memory. He said he aims to use new technology to win back market share lost during a pricing "misstep" earlier this year.
In January, Intel raised its price on flash memory, which is used in handheld computers and cell phones.
"I think they are optimistic, especially on the telecommunications side and everything that goes around it," said Alan Loewenstein, co-portfolio manager for the John Hancock Technology Fund. |
