Intel tops profit mark
Chipzilla shares' up in after-hours trading
By Janet Haney, CBS MarketWatch
Last Update: 5:40 PM ET Jan 13, 2000 Join the Intel discussion
Hardware Report
SANTA CLARA, Calif. (CBS.MW) -- Intel surprised Wall Street Thursday as the chip-industry powerhouse sailed past fourth-quarter earnings expectations, citing strong demand for its products, sending the stock up in after-hours trading.
The company, though, offered cautious comments about its current quarter.
After the market closed, Intel (INTC: news, msgs) said it earned $2.4 billion, or 69 cents a share, excluding a one-time, acquisition-related $59 million charge. In the year-ago quarter, the company made $2.1 billion, or 60 cents a share, adjusted for a stock split.
The consensus analyst estimate, compiled by First Call, called for the semiconductor leader to post a profit of 63 cents.
Sales for the period hit $8.2 billion, up 8 percent from the year-earlier number of $7.6 billion.
Ahead of the news, Intel, a component of both the Dow Jones Industrial Average and the Nasdaq Composite, pulled back slightly to 91 1/16. It then rose to 94 3/8 in Instinet after-hours trading.
"Execution is key," said Christian Koch, senior technology analyst at Trusco Capital Management in Atlanta, which owns 5 million Intel shares. "You just don't bet against Intel in their strongest quarter. So, for the bears out there, it's not going to be a fun day tomorrow."
Insight into operations
Intel said in a statement that its microprocessor and chip-set unit shipments set new records in the fourth quarter, as did shipments of its motherboard products. Meanwhile, embedded processor and microcontroller unit shipments were down sequentially in the fourth quarter.
Shedding a bit of light on much-talked-about average selling prices, Intel revealed that average prices of its microprocessors rose slightly in the period. Gross margins in the fourth quarter were "up slightly" from the company's previous guidance due to strong revenue, Intel added.
Looking ahead
Additionally, Intel cited seasonal factors as reason for its expected sales decline in the first quarter vs. the fourth quarter. Likewise, a flat gross margin is anticipated for the first quarter, with the 2000 figure projected at 61 percent, vs. 59.7 percent for 1999.
"My message is that if they can keep $8 billion in Q1 revenue, that's actually better than some of the historical Q1 top-line numbers they have put up," said Trusco Capital's Koch. "It's to be expected that they would guide flat, but (the first quarter) may be stronger, knowing Intel's (tendency toward) pessimistic guidance."
Research-and-development costs are expected to reach $3.8 billion in 2000, up from $3.1 billion in 1999. That R&D spending excludes any in-process R&D.
Clear skies
Erika Klauer, an analyst at Deutsche Banc Alex. Brown, said the outlook offered by Intel should be very positive, because the PC market is healthy and Intel has new products in the vanguard, including faster Pentium III chips and special mobile products, in the pipeline for the first half of 2000. "Even more important for the stock will be the outlook," she said.
In the third quarter, Santa Clara, Calif.-based Intel fell short of its profit target for a second consecutive three-month period. It reported net income of $1.9 billion, or 55 cents a share, on revenue of $7.3 billion. Analysts had expected earnings of 57 cents a share. See full story.
Analysts weigh in
Some analysts who follow the Silicon Valley behemoth had put fourth-quarter revenue projections between $7.9 billion to $8.2 billion.
Klauer said her estimate for Intel was $7.9 billion. She projected Intel's gross margin at 61.5 percent.
"PC unit growth has continued to be extremely robust, despite fears about a possible Y2K shutdown," Klauer added. "Secondly, it's important to note that pricing on processors has been very stable. The Pentium III 500-MHz and 550-MHz products has been actually quite tight."
Merrill Lynch analyst Joe Osha wrote in a research note that he expected Intel to earn 63 cents a share on revenue of $8.2 billion.
Quarterly overview
Meanwhile, the battle between Intel and rival chipmaker Advanced Micro Devices (AMD: news, msgs) has continued to be waged during the quarter. The companies have been trying to beat each other to the punch by announcing better, faster microprocessors.
Intel may have won a round with the unveiling of its Pentium III processors in speeds of 750 and 800 megahertz. See related story.
Following that, two weeks later, AMD unleashed its 800-MHz Athlon processor. At that time, AMD said H-P had chosen its Mobile AMD-K6-2-P processor to power two new systems in H-P's Pavilion notebook PC series. Likewise, Gateway (GTW: news, msgs) said it will use AMD's Athlon processor for its Select PC series. See related story.
AMD, located in Sunnyvale, Calif., is set to release its fourth-quarter results Jan. 19.
After months of delays, Intel introduced its 820 chip set in November. The product is the company's first desktop chip set using Rambus (RMBS: news, msgs) technology, which aims boost features on personal computers. The 820 chip set has better memory capabilities and enhanced graphics and is the first desktop chip set using Direct Rambus DRAM memory, the company said. See full story.
Additionally, Intel attempted to set the tone for its first quarter, as it introduced its Pentium III Xeon in an 800-MHz speed Wednesday. The product is targeted toward workstations and front-end Internet servers.
Future looks chipper
"In 2000, we will continue to increase the performance of our scalable and highly available Pentium III Xeon processors and introduce our 64-bit Intel Itanium processor, making it an exciting year for Intel-based server and workstation customers," said Mike Fister, vice president and general manager of Intel's enterprise server group, in a statement.
The Itanium, which is expected to enhance the performance of e-business and multimedia operations, is anticipated to be in production by midyear.
A mobile Pentium III processor running at 700 MHz is projected to be launched in the first half of 2000.
In the second half of 2000, Intel plans to unveil Pentium III and Pentium III Xeon in speeds exceeding 800 MHz, as well as new processors that have been code named Willamette and Timna. |
