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To: Dealer who wrote (8408)	10/17/2000 9:21:34 PM
From: Dealer	Read Replies (1) \| Respond to of 65232

INTC--Intel Earnings Beat Expectations By Duncan Martell SAN FRANCISCO (Reuters) - Intel Corp. (NasdaqNM:INTC - news) gave investors an early Christmas present on Tuesday as the world's largest chip maker reported third-quarter profits that rose 52 percent -- topping diminished expectations -- and forecast that sales in the fourth quarter will rise from the third-quarter's $8.73 billion. ``They came in at the high end of their revised expectations, thank God,'' said analyst Dan Niles at Lehman Bros. ``The sales guidance for the fourth quarter is less than what you'd hope for, but given how depressed the rest of us have been throughout the summer, we'll take it.'' The Santa Clara, Calif.-based company said net income before acquisition-related charges rose to $2.9 billion, or 41 cents a share, from $1.90 billion or 27 cents, a year ago. That was above the 38 cent-a-share consensus forecast from analysts, according to First Call/Thomson Financial. Sales rose 19 percent to $8.73 billion from $7.33 billion, 5.2 percent higher than the second quarter. That was far less than the 9 percent to 12 percent sequential revenue growth analysts were expecting before Intel issued its sales warning Sept. 21, which sent Intel stock tumbling 22 percent the next day. But the results and its guidance that fourth-quarter revenue will rise 4 percent to 8 percent from the those in the third was enough to push Intel shares slightly higher. Shares Rise After Hours In after-hours trading, the stock rose to $37-1/2 on Instinet, from a regular session close of $36-3/16 on Nasdaq, where the stock rose 1/2. Intel shares have lost more than half their value in the last six weeks as investors sold shares in high-technology stocks by the bushel. ``Predictably, they are guiding up for revenues in the fourth quarter but in the context of all the negativism surrounding Intel, this will cause investors to breathe a sigh of relief tomorrow,'' said Drew Peck, an analyst at SG Cowen. Intel was hampered in the quarter by lower-than-expected growth in Europe, by market share gains scored by its scrappy rival Advanced Micro Devices Inc.(NYSE:AMD - news)., and the aggressiveness of Intel's own third-quarter forecast that it disclosed on its second-quarter earnings conference call. ``We had forecast a phenomenal (third quarter) and we ended up having a pretty normal one,'' said Intel's Chief Financial Officer Andy Bryant on a conference call. ``Don't think of Europe as not having been a good quarter, think of it being a little down and us making a very bullish projection.'' Europe accounted for 26.5 percent, or $7.79 billion of Intel's $29.4 billion 1999 sales. ``They should take their forecasting department out and shoot them,'' said analyst Ashok Kumar at U.S. Bancorp Piper Jaffray of Intel's initial forecast that sales in Europe would rise as much as 25 percent from the second. ``Europe has never grown that fast.'' Intel's bungled third-quarter sales forecast as well as a declining euro and soaring energy prices once again showed that such Old Economy issues as flaccid currencies and surging oil prices are still relevant, even to high-tech companies. ``The third quarter is clearly related to the Old Economy tripping up the New Economy,'' Niles said. Strong Gross Margin Analysts Peck and Niles said they were encouraged by Intel's strong gross margin, or the percentage of revenue left after subtracting product costs. At 64 percent, it was two percentage points higher than its revised guidance of 42 percent. Bryant said that in the fourth quarter -- the PC industry's strongest -- it will be about 63 percent. ``We think again it could be a good, solid quarter but certainly we're not forecasting a blowout,'' Bryant said in an interview. Intel also said that shipments of microprocessors -- the brains of PCs and the product that accounts for 80 percent of Intel's sales and virtually all its profits -- was little changed from the second quarter, as were average selling prices for each chip. Kumar said he estimates Intel sold 34 million microprocessors in the third quarter at an average price of $177 to $178 each and that by the end of the year, total microprocessor shipments for Intel will have risen in the mid-teens, a perfectly respectable figure. The results stood in stark contrast to International Business Machines Corp. (NYSE:IBM - news), which had third-quarter profits that met forecasts but disappointing sales and issued a scaled-back outlook for its businesses. Niles said to expect tech stocks -- with the exception of Intel -- and the market in general to fall tomorrow on Big Blue's earnings report, adding to the effect of an earnings warning from chipmaker RF Micro Devices Inc. ``I'd be stunned if Intel wasn't up tomorrow, even with everything else going on,'' such as IBM, which tumbled 6 percent after the market close and RF Micro (NasdaqNM:RFMD - news), which plunged nearly 13 percent in regular trading on Nasdaq. Aggressive Pricing Executive Vice President Paul Otellini told investors and analysts on the conference call to expect Intel to get more aggressive with pricing in certain portions of the microprocessor market, implying that AMD's market share gains against Intel had gone as far as it would like. While some, including Peck expect, an all-out price war between Intel and AMD the rest of this year and into next, Niles argued that because Intel competes mainly against AMD in the consumer market, which accounts for about 30 percent of microprocessor sales, any price war would hurt AMD more than it would Intel, which sells its chips also into the corporate and computer server markets. ``We're definitely not out of the woods yet and this (their guidance) is not blockbuster,'' Niles said. ``But relative to what could have happened to us, we feel very good.''