Wed, 11 Nov 1998, 7:34am EST
Intel Says 4th-Quarter Revenue May Rise as Much as 10%, More Than Thought
Intel Says 4th-Qtr Revenue to Be Better Than Expected (Update2)
(Adds analyst comment, background.)
Santa Clara, California, Nov. 10 (Bloomberg) -- Intel Corp.,
the world's largest computer-chip company, said fourth-quarter
revenue will rise as much as 10 percent from the previous quarter
amid stronger-than-expected demand from personal computer makers.
The forecast lifted Intel shares, which rose 1 9/16 to
97 9/16 in regular trading, to as high as 102 3/8. Analysts
expect it to bolster other computer-related shares as well.
''If the No. 1 player in microprocessors says demand is that
good, that means the whole technology area is going to have a
pretty good Christmas selling season,'' said analyst Jack
Geraghty of Gerard Klauer Mattison, who rates Intel ''long-term
buy.''
Chipmakers are benefiting from rising sales of PCs to
businesses and consumers, and are getting an added boost from the
back-to-school and holiday shopping seasons. Intel, which
struggled with lackluster demand in the first half, also is being
helped by its new products for consumer PCs and expensive
machines to run computer networks.
''If they can already predict revenue is above expectations,
business must be doing really well in the first month,'' said
analyst Phil Schettewi of Loomis, Sayles & Co., which owns Intel
shares. ''Demand is strong coming up on the holiday season.''
Rosier Forecast
Last month, Intel said fourth-quarter sales would be only
slightly higher than the third quarter's $6.7 billion. Intel was
expected to earn 95 cents a share in the fourth quarter, the
average estimate of analysts surveyed by First Call Corp.
A year ago, Santa Clara, California-based Intel reported
earnings of $1.74 billion, or 98 cents a share, on sales of $6.51
billion.
Before the forecast, shares of Intel, Dell Computer Corp.
and International Business Machines Corp. rose today on optimism
for strong holiday PC sales. PC-related shares are rebounding
from an October slump on signs that consumers are buying new
computers. PC unit shipments are expected to rise 13 percent in
the fourth quarter, their biggest gain all year.
''PC inventories are way down and demand is way up,'' said
analyst Stephen Dube of Wasserstein Perella Securities, who rates
Intel ''buy'' and now expects fourth-quarter earnings-per-share
of $1.00.
Dell, which rose 1 5/16 to 70 5/16 today, traded as high as
71 13/16 after the close of U.S. markets.
Many technology stocks tumbled earlier this year on investor
concern that spending on PCs would slow once the traditionally
strong holiday season ends. Intel shares traded as low as 65
21/32 on June 3.
Now, with relative calm in world financial markets and
persistent signs of strength in the U.S., investors are becoming
more optimistic, analysts said.
Margins, Expenses
Intel said its gross margin, or the percentage of sales
remaining after costs of production are subtracted, is expected
to widen by a ''couple'' of points from the 53 percent reported
in the third quarter. When it reported third-quarter earnings,
the company said gross margin would be ''flat to slightly up.''
Expenses will be about 8 percent to 10 percent higher than
the $1.4 billion in the third quarter. Earlier, Intel said
expenses would increase 3 percent to 5 percent.
The company also said it won't complete its previously
disclosed 3,000 job cuts this year. At the end of the third
quarter, Intel said 2,000 jobs had been cut and the remaining
1,000 would be eliminated by the end of the year. Today Intel
said it will have a few hundred jobs left to cut at the end of
December.
Intel is holding an analyst meeting Friday in San Francisco.
Dell, the No. 3 worldwide PC maker, reports fiscal third-quarter
earnings on Thursday.
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