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To: Clappy who wrote (671)	7/19/2000 6:53:26 AM
From: Clappy	Read Replies (1) \| Respond to of 1115

Intel Profits Beat Forecasts by One Cent From: siliconinvestor.com By Duncan Martell Jul 18 7:42pm ET PALO ALTO, Calif. (Reuters) - Intel Corp.'s second-quarter profits squeaked by analyst forecasts by a penny on Tuesday, boosted by a whopping gain on the sale of investments as revenue rose 23 percent from a year ago. The world's largest chipmaker also said sales should rise in the current period from the second quarter, with some analysts pegging that growth at as much as 10 percent. Intel (INTC.O)said that for the quarter ended July 1, net income rose 98 percent to $3.52 billion, or 50 cents a share, from $1.78 billion, or 26 cents, a year ago. Sales rose to $8.3 billion from $6.75 billion. The results include $2.1 billion from the sale of securities it holds in 450 companies. The figures also exclude acquisition-related costs and are adjusted for a 2-for-1 stock split. On that basis, the results were slightly ahead of analyst forecasts of 49 cents a share -- adjusted for the 2-for-1 split -- according to First Call/Thomson Financial. Intel was partly hobbled in the second quarter by a ``bug'' in some of its motherboards and was caught off guard by stronger-than-expected demand, leaving it unable to sell as many microprocessors as it could have otherwise. At the same time, both Intel executives and analysts expect the second half of the year to be far stronger than the first half due to the holiday season, the release of its Pentium 4 chip and the upgrade to Microsoft Corp.'s Windows 2000 operating system. ``I think a lot of people were a bit nervous about this quarter and there might be a bit of a collective sigh of relief that they pulled it out and that should be viewed positively,'' said analyst Drew Peck at SG Cowen. ``The second half of the year is likely to be a whole lot better.'' RECORD SHIPMENTS Shares of Intel traded as high as 146-1/4 after the report. The stock, which has more than doubled in the past year, fell 3-5/16 to 143 in regular Nasdaq trading. Intel said it shipped record numbers of microprocessors -- the average selling price for which remained flat from the first quarter -- as well as flash memory chips used in cell phones and other devices. The results also come as the chip industry is roaring ahead, spurred by the growth of the Internet, still-strong sales of PCs and computer servers as well as strong sales of wireless devices. ``Demand is strong and we saw more of it than we expected,'' Andy Bryant, Intel's chief financial officer said in an interview. ``We see continued growth and a strong second half.'' Santa Clara, Calif.-based Intel said that it sees third-quarter sales rising from the $8.3 billion it recorded in the second quarter and that it expects gross margin -- the percentage of revenue left after subtracting product costs -- to be 63 percent to 64 percent. Gross margin in the second quarter was 60.2 percent, slightly less than forecast due to a $200 million charge for replacing defective motherboards. Including costs of $21 million before taxes for purchased in-process research and development and $394 million pretax for amortization of good will and other items, Intel had net income of $3.14 billion, or 45 cents a share, up from $1.75 billion, or 25 cents a share, a year ago. CAPACITY CONSTRAINED ``Demand was higher in the first half of the year than they thought, which means they're capacity constrained and demand will be higher in the second half, so they'll be capacity constrained then, too,'' said analyst Dan Niles at Lehman Brothers, who upgraded Intel stock to a ``buy'' in January at $82 a share. ``Having said that, I think they can do 10 percent sequential revenue growth.'' Ashok Kumar, an analyst at US Bancorp Piper Jaffray, said he expects third-quarter sales to rise in ``the high single digits'' from second-quarter levels. Still, Intel faces hurdles in getting as many microprocessors out the door to meet demand, and Bryant said that chip-making capacity is still tight with not much left over to meet additional orders. On top of that, sales at Intel are still growing slower than the overall chip industry, which is forecast to rise 32 percent this year. Overall, though, analysts said that with its move to a more efficient chip-making technology as the year continues, Intel will be able to boost the number of microprocessors and flash memory chips it makes, helping to meet demand. ``They should get out of this capacity constraint situation by September,'' Kumar said. ``Windows 2000 and the upcoming Pentium 4 should be wind at their back.'' -- stockcharts.com[PA!D20,2!F][VC60][ILF!LK14!LL14] This chart may read a sell signal. It should be interesting to see how the earnings report causes the markets to react.