Intel thrives, LSI looks to layoffs
By Michael Kanellos
Staff Writer, CNET News.com
October 12, 1998, 4:00 a.m. PT
A good news/bad news scenario will likely play itself
out this week in earnings announcements from
semiconductor companies.
On the positive side, Intel is expected to report
revenues in excess of the projections the company
released last month, according to some analysts.
Accordingly, the company is expected to report
earnings of 80 cents a share or more. Intel reports
tomorrow.
Meanwhile, LSI Logic
may announce layoffs
when it reports its third
quarter results on the
morning of October 14.
Sources close to the
company and analysts
have said that the
company could announce
a layoff effort to
streamline operations due
to a slump in sales.
LSI makes chips for communication devices and
set-top boxes.
The upswing in Intel's business largely derives from
steady sales in the PC industry for the third quarter.
A PC glut in the first half suppressed sales. But that
vanished by the middle of the summer, clearing the
path for processor sales.
In September, Intel revised its revenue outlook and
said that sales would be 8 to 10 percent higher in the
second quarter. Before that, the company predicted
flat revenue. Now, analysts believe that revenues
could jump 12 to 13 percent beyond the second
quarter results. Accordingly, predictions for earnings
have risen as well.
"Earnings per share will be in the low to mid 80s,"
said Dan Niles, an analyst with BancBoston
Robertson Stephens. Revenue, he added, would
come in at around 12 to 13 percent higher than
second quarter revenues of $5.9 billion.
Twenty five analysts have raised their estimates
upward in the past month in the wake of the
company's September 11 announcement, according
to First Call.
The consensus estimate for earnings is now 80 cents
a share. Earlier, it was in the 70-cent range. Although
that figure would be a decrease from a year ago,
when Intel posted a profit of 88 cents a share, it will
mark an improvement over earnings per share of 66
cents in the second quarter.
Ashok Kumar, an analyst with Piper Jaffray pegged
earnings at 84 cents a share.
LSI, however, faces a different fate.
In August, LSI warned investors that revenues would
be five to 10 percent lower than the revenue for the
second quarter while earnings per share would
decline from 23 cents per share for the second
quarter to the low to mid-teens. The company cited
the slowdown in worldwide semiconductor demand as
the cause of the decline. "We expect supply and
demand to come together in the next 12 months,"
said CEO Wilf Corrigan in a prepared statement.
A consensus of analysts on First Call pegged LSI's
earnings per share at 13 cents a share.
"They will go (discuss) some long-term plans for the
next four to six quarters," on the conference call,
predicted Niles. "Part of that will relate to getting
operations to be more profitable."
Niles stated that he did not have information on any
exact layoff plans of LSI but said there is a likelihood
that streamlining will occur. LSI has increased its
research and administrative budgets in recent
quarters, but has not experienced a revenue boost to
justify the spending.
"They are not getting the revenue growth to support
that," he said. "Expenses definitely have ballooned
up." Niles predicted that the company would report 14
cents per share in earnings and revenues close to
$300 million.
"The semiconductor industry is hurting in general,"
said Richard Belgard, an independent processor
consultant. |
