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Strategies & Market Trends : LastShadow's Position Trading -- Ignore unavailable to you. Want to Upgrade?

To: Redhook who wrote (17132)	7/13/1999 6:59:00 PM
From: Susan Saline	Read Replies (2) \| Respond to of 43080

NETA rumors Message 10492462

To: Redhook who wrote (17132)	7/13/1999 7:20:00 PM
From: LastShadow	Respond to of 43080

Intel Intel 2nd-Quarter Profit Rises 49%, Less Than Expected, as Prices Plummet By Molly Williams Intel 2nd-Qtr Net Rises 49%; Expects Strong 2nd Half (Update2) (Adds analyst, executive comments, details in last paragraph.) Santa Clara, California, July 13 (Bloomberg) -- Intel Corp., the world's No. 1 computer-chip maker, said second-quarter profit rose 49 percent, less than expected, though it forecast a strong second half with sales and profit picking up. Net income increased to $1.75 billion, or 51 cents a share, from $1.17 billion, or 33 cents, a year earlier. The average analyst estimate from First Call Corp. was 53 cents. Some unpublished forecasts were as high as 57 cents. Sales rose 14 percent, less than expected, to $6.75 billion from $5.93 billion. Intel, caught off guard last year by low-priced PCs, accelerated product introductions and slashed prices on its low- cost chips to compete with Advanced Micro Devices Inc. Improved manufacturing and cheaper packaging weren't enough to offset plummeting prices. Still, Intel will unveil new products in the second half in time for the back-to-school and holiday seasons. ''The company was very aggressive on pricing in order to regain market share,'' said analyst Ashok Kumar of U.S. Bancorp Piper Jaffray. The average selling price for all Intel chips fell to about $195 from $218 in the first quarter, Kumar said. ''In the second half, we expect strong unit and price recovery.'' Intel shares fell 1/16 to 65 3/8 in Nasdaq trading before the report. They traded as high as 66 1/2 after the earnings were released on the outlook for the rest of the year. Unusually Bullish Intel said it expects revenue to rise in the third quarter from second-quarter levels. Sales in the third quarter of last year were $6.73 billion. ''Their bullishness is pretty unusual for Intel,'' said Megan Graham Hackett, an analyst at Standard & Poor's Equity Group. ''Their higher expectations for the second half bode very well.'' Gross margin, or the percentage of sales remaining after costs of production are subtracted, is expected to widen from 59 percent in the second quarter. Intel said gross margin for the full year is expected to be 60 percent, up from an earlier forecast of 57 percent. Intel's optimistic forecast also allays some fears that companies might stop purchases in advance of the turn of the century, when some computers could malfunction by reading 2000 as 1900. ''We see no impact of any Year 2000 disturbance,'' said Intel executive vice president Paul Otellini. Pricing Battle Intel, based in Santa Clara, California, lost sales to rivals last year, when its market share fell to 76 percent from 86 percent in 1997. It's regained share in recent months by slashing prices and offering deep discounts to some small PC makers. Several analysts expressed concern during the second quarter that Intel was being too aggressive on pricing to win back market share and that increased sales of its low-end Celeron chip might take sales from its more expensive chips and hamper earnings. Intel succeeded in regaining market share in the low-end desktop PC market, increasing its share in retail PC sales to 49 percent from a low of 34 percent in February, according to researcher ZD Market Intelligence. With market share ticking back up, analysts said Intel may ease up on the price pressure. Intel Chief Financial Officer Andrew Bryant, though, said only that the company will do whatever it takes to win. ''We will compete and be successful,'' Bryant said. Intel's stock ended the second quarter almost exactly where it was at the beginning of April, compared with a rise of more than 12 percent in the Standard & Poor's Electronic Semiconductor Index. Seasonal 2nd Qtr ''It's a seasonal second quarter,'' Bryant said. ''This was not a big surprise to us.'' Intel had said in April that it expected sales to be unchanged or to fall slightly from the $7.1 billion reported in the first quarter, and Bryant said the results were at the low end of that expectation. Intel said microprocessor unit shipments fell in the second quarter from the first quarter. Expenses rose 6 percent from the first quarter, at the low end of expectations. Expenses are expected to be 4 percent to 6 percent higher in the third quarter than the $1.7 billion reported in the second quarter. Bryant said the average cost for Intel's processors is lower than the company had targeted. Though Intel doesn't break out what its average sales price is, Otellini said the average selling price fell below the narrow range that Intel had seen for the past year. Pentium III chips are expected to exceed Pentium II unit shipments in the third quarter, Otellini said. Intel also said it repurchased 25 million shares during the quarter, at a cost of about $1.5 billion.