re: No "Nice Quarter" intros from the analysts.
would the following qualify as nice?
that is "``It's not a total catastrophe."
-AK
Intel Posts Its Biggest Profit Decline in Four Years (Update2)
2006-04-19 17:17 (New York)
(Adds investor's comment in fourth paragraph.)
By Ian King
April 19 (Bloomberg) -- Intel Corp. said first-quarter
profit sank 38 percent, the biggest decline in more than four
years, as the world's biggest computer-chip maker lost market
share to Advanced Micro Devices Inc.
Net income fell to $1.35 billion, or 23 cents a share, from
$2.18 billion, or 35 cents, a year earlier, Santa Clara,
California-based Intel said today in a statement. Sales dropped
5.2 percent to $8.94 billion.
The report marked the first revenue decline in 12 periods.
Less than a year into Chief Executive Officer Paul Otellini's
tenure, Advanced Micro is eating away at his company's orders and
raising concern Intel may have lost its technology lead. While
the forecast trailed some analysts' estimates, it wasn't as bad
as some investors feared.
``It's a little bit of a relief,'' said Tim Allen, who helps
manage $7.8 billion, including Intel shares, in Seattle for
Wentworth, Hauser & Violich. ``It's not a total catastrophe. It
looks like they're saying the second quarter is the bottom.''
The shares rose 34 cents to $19.90 in extended trading after
the report. They had gained 17 cents to $19.56 at 4 p.m. New York
time in Nasdaq Stock Market composite trading and are down 22
percent in 2006, making the stock the worst performer in the Dow
Jones Industrial Average.
Intel missed its profit forecast in the fourth quarter and a
month ago reduced its estimates for the first period. Twenty-
three analysts recommend buying shares, 26 suggest holding them
and three tell clients to sell.
Otellini's Challenge
Otellini, 55, struggled this year to limit Sunnyvale,
California-based Advanced Micro's gains. Intel fell to less than
80 percent of the PC microprocessor market in the fourth quarter
for the first time in more than four years.
Intel wrote down the value of some inventory in the period,
Chief Financial Officer Andy Bryant said in an interview. He
wouldn't put a value on the writedown.
Sales will fall to $8 billion to $8.6 billion this quarter,
Intel said. Analysts expected $8.85 billion, the average of 35
estimates in a Thomson Financial survey. Sales rose 15 percent to
$9.23 billion a year earlier.
``The second-quarter sales is a devastatingly low number,''
said Eric Ross, an analyst in New York with ThinkEquity Partners,
who rates Intel shares ``sell'' and said he doesn't own them.
Gross margin, the share of sales left after manufacturing
costs, will narrow further this quarter, to about 49 percent. The
margin was 55.1 percent in the first period, missing a January
prediction of 59 percent, plus or minus a couple points.
Bellwether
Sales this year will fall for the first time in five years.
Intel today predicted a 3 percent drop from 2005's $38.8 billion,
after originally calling for an increase of as much as 9 percent.
Analysts already had been more pessimistic, on average
estimating a 2.1 percent drop in annual sales. Gross margin will
be 53 percent for the year, Intel said. The chipmaker's original
margin forecast was 57 percent.
Intel earnings are seen as an indicator of demand for
computers and components. Apple Computer Inc. also reported
today. Yahoo! Inc., International Business Machines Corp. and
Texas Instruments Inc. all reported higher profit yesterday.
Merrill Lynch & Co.'s Joseph Osha, the third-ranked chip
analyst by Institutional Investor magazine, had predicted first-
quarter net income of 24 cents and sales of $9.03 billion. His
estimate included 5 cents in expenses for stock options.
Sales estimates averaged $8.9 billion and profit projections
averaged 23 cents a share, according to a Thomson Financial
survey. Thomson wouldn't say whether the figures include costs of
expensing stock options.
The quarter ``after the revision down, played out about
where we expected,'' Bryant said. ``We believe the second half
will be reasonably strong.''
Price Cuts
Sales this quarter will be hurt by price reductions aimed at
clearing out inventory of older parts and winning back orders
from Advanced Micro, analysts including Michael Masdea of Credit
Suisse First Boston in San Francisco said.
``It's going to take pricing and products to help stem the
losses to AMD,'' said Pat Becker Jr., who helps manage $2.4
billion, including Intel shares, at Becker Capital Management in
Portland, Oregon.
Intel also cut its budget for spending on new plants and
equipment for 2006 today, to $6.6 billion from $6.9 billion.
Some investors are betting that a new design of Intel's
chips, scheduled to make its way into products in the second half
of this year, will allow it to regain share.
Starting in the late 1990s, Intel focused on ratcheting up
the speed of its products. The changes meant the processors
soaked up more electricity just as Advanced Micro added chips
that used less. Intel's new chip design is based on the main chip
in its best-selling Centrino laptop product, a semiconductor
designed to use less power.
``You're not going to see hyper growth until October,'' said
Matt Kelmon, a fund manager at Kelmoore Investment Co. in Palo
Alto, California. His firm owns about 500,000 Intel shares and
plans to buy more if the stock falls further.
(Intel will host a conference call at 5:30 p.m. New York
time to discuss the results. Listen at {LIVE <GO>}.)
--With reporting by Jonathan Thaw in San Francisco, Jason Kelly
in Atlanta and Rhonda Schaffler and Christina Medici in New York.
Editor: Antonelli
Story illustration: See {INTC US <Equity> ANR <GO>} for a
chart of analysts' recommendations on the stock. To chart
Intel's earnings against estimates, see
{INTC US <Equity> SURP <GO>}.
For Intel's gross margin history and other financial
ratios, see {INTC US <Equity> FA <GO>}.
To contact the reporters on this story:
Ian King in San Francisco at (1)(415) 743-3548 or
ianking@bloomberg.net.
To contact the editor responsible for this story:
Emma Moody at (1)(212) 617-3504 or emoody@bloomberg.net.
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