Intel has been losing market share to AMD on the low end of the chip market, and, on the high end, it's
entering the server and workstation market, where it hasn't yet proven itself.
Silicon Valley
Oct 14, 1998
Intel Surprise Party Ends in Tears
By Marcy Burstiner
Staff Reporter
SAN FRANCISCO -- Has Intel (Nasdaq:INTC - news) forgotten that the bulk of its shareholders
expect it to maintain its stranglehold on the chip market? The chip maker presented an earnings
surprise of 9 cents a share Tuesday, but offered little of what Wall Street really wanted to hear:
Indications of healthy growth in coming quarters and sustained market dominance.
"They said revenue growth will only be up slightly," said David Risgard, managing director of North
Star Asset Management. "That was a little disappointing. We aren't really excited about the stock."
In its third quarter, Intel posted net income of 89 cents a share, or $1.6 billion, on revenue of $6.7
billion. That gave the company a 9% revenue growth over the third quarter of last year. While the
profit was just one cent a share over last year's third quarter, it was up 33% from the company's
dismal second quarter. Analysts polled by First Call estimated earnings at 80 cents a share, with the
whisper numbers at 84 cents a share in recent days.
But Risgard and others worry about the coming year. Intel has been losing market share to Advanced
Micro Devices (NYSE:AMD - news) on the low end of the chip market, and, on the high end, it's
entering the server and workstation market, where it hasn't yet proven itself. On a conference call to
analysts this afternoon, CFO Andy Bryant ducked every question about market share, competition
and next year's financial health.
Bryant said the ever-quickening turnaround times from PC makers have made it difficult to predict past
a quarter. When asked whether revenues in the fourth quarter -- historically, the strongest of the year
-- might show the same unexpected growth that the third quarter did, Bryant said, "That's a possibility,
but you won't see us stand up and defend any number too strongly."
Not quite a rousing forecast. And within the third quarter, Intel gave investors reason to worry.
Despite flat net income, its operating income dropped 6% quarter-on-quarter thanks to a 18% rise in
operating costs.
And the Bryant warned that the company had no easy way to know how it will be affected by the
Asian downturn. "We are playing this one day at a time," he said.
Intel's stock was trading at 81 1/2 in after-hours trading, more than two points down from its closing
price Tuesday, said Martin Joyce of Mr. Stock.com. Intel's stock fell 1 7/8 points to 83 9/16 before
the conference call, which took place after the market closed. Some 25 million shares traded hands, an
increase over its average daily volume of 17 million shares. |
