Looks like margins will be squeezed pretty bad this qtr....I would guess they won't make the number today on that basis.
SANTA CLARA, Calif. (Reuters) - Intel Corp.'s earnings growth is expected to slow in the third quarter as sales of popular
low-cost personal computers are eroding the chip maker's profitability, industry analysts said.
Intel, the world's biggest computer chip maker, is caught between two conflicting forces. On one hand, the company is
increasing production of the Pentium II, a superfast and highly profitable chip designed for powerful computers.
On the other hand, consumers are buying loads of PCs selling for less than $1,000, putting pressure on PC makers to buy less
expensive chips and other components from suppliers such as Intel, which is due to report earnings on Tuesday.
"Intel has been cautious in terms of the product transition," said Ashok Kumar, analyst at brokerage Southcoast Capital. "The
trendline on the average selling price of microprocessors will fall."
While about 20 percent of the chips that Intel sold in the third quarter were Pentium IIs -- which sell for up to $851 -- the
average price for all Intel microprocessors will fall to about $215 in the quarter from $255 in the second quarter, Kumar said.
"Unit shipments are expected to rise, but microprocessor revenue is expected to rise only marginally to $4.7 billion from $4.6
billion in the second quarter," he said.
When Intel reports its earnings Tuesday afternoon, Wall Street expects earnings per share of 91 cents on average, according
to a recent survey by Zacks Investment Research.
In the same quarter a year ago, Intel reported net income of $1.31 billion, or 74 cents a share, on revenue of $5.14 billion.
Intel's earnings rose about 58 percent in the second quarter and more than doubled in the first quarter of 1997.
So far this year, unit shipments of personal computers have been strong, boosting many technology stocks, including Intel,
Compaq Computer Corp. and Microsoft Corp.
But in recent weeks, investors have become concerned about steeper-than-expected cuts in prices for memory chips,
networking gear and PCs, which could hurt profits at many high-tech companies. |
