Intel Says Demand Shortfall is Across All Product Lines
After the bell, the chip giant warning that it sees first-quarter earnings fall short of estimates and revenues slipping 10% from fourth-quarter levels. Ining us with more on this developing story is our technology correspondent, bruce francis.
Bruce: Intel says that revenues will be 10% below the first quarter's levels, and that margins will fall by 2 percentage points. The first quarter is rarely a barn burner in the pc industry. And intel had been expecting revenues to be flat sequentially. But intel tells me this is how it happened: Intel has been experiencing slower demand overall, much slower than they had been expecting based on intelligence from their customers, mostly computer manufacturers. Now intel tells me that they are still trying to figure this one out. But the slowdown seems to be across all geographies. Now that is significant. It is not, for example, the result of an abrupt falloff
in any one region. It also happened across all products, that is significant too. There had been some concerns among analysts that consumer preferences for chief computers would soon affect the high end corporate users, but this does not seem to be the case, again, across all product categories here. Now the culprit seems to be weaker orders from so biggest players in the pc industry. They all fall into this so-called turns business, customers of intel who order chips and build them into computers in the same quarter. Increasingly, those are the biggest players in the business.
Companies like dell, compaq, ibm, and hewlett-packard. Now maria, this is a result of a lot of the build-to-order moves that we have seen among the big players, the intelligence, there is much less lead time and dropoffs like this, will be more likely to happen because they will be less intelligence going forward and less sort of give-and-take in the industry. So a very interesting report from intel, one that will certainly have implications for
technology stocks at the open bell tomorrow. Maria?
>> Bruce, we should point out that in aftermarket trading, along with intel, several technology stocks are right now trading down considerably. Dell computer was down $5. Intel, ibm, motorola, compaq all down on the after-market trading session. Let me ask you, what are analysts saying about the length of this, how long will this last? I mean, will this actually go into the next quarter or is this just a singular quarter event?
Bruce: Well, this is part of the problem that we have with this build-to-order move one could potentially say here. Because we have less intelligence going forward, this is what is going to happen. We don't know quarter-to-quarter. Computer manufacturers benefit from tighter management of their business processes but this happens too. Back to you, ted.
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