Intel Expects Sales to Rise Next Year
SAN FRANCISCO (Reuters) - Craig Barrett, Intel Corp.'s president and chief executive on Wednesday forecast 2001 sales growth in the ``high teens'' and a slew of faster processors and new products from the world's largest computer-chip maker as it taps new, fast-growing markets.
Other executives noted that the fourth-quarter -- the personal computer industry's strongest -- was off to a strong start after a less-than-stellar third quarter, when Intel (NasdaqNM:INTC - news) had to issue a sales warning. The high-technology bellwether, which rode the PC era to billions in profits, is now looking to broaden beyond microprocessors and into networking, wireless and communications products.
``We have started well in the fourth quarter and we are on track to meet our guidance,'' said Sean Maloney, Intel's head of sales and marketing in a meeting held for analysts that was broadcast live over the Internet. Last month, the Santa Clara, Calif.-based company said fourth-quarter revenue would rise 4 percent to 8 percent from the third-quarter's $8.73 billion.
Even though the 32-year-old chipmaker is in the enviable position of having made 80 percent of the microprocessors that power the world's hundreds of millions of PCs and server computers, investors of late have punished Intel's stock price. They have been concerned about slower-than-expected PC growth, but the reality is -- after a bang-up 1999 due to the 2000 date change -- overall, the PC market is still growing in the same historical range it has been for about the last 10 years.
Intel shares fell 1/8 to $44-7/8 in regular Nasdaq trade and are well off their record high of $75-13/16. In trading after the close, however, the stock rose to $47.
'IT'S OKAY'
``I'm very comfortable with where we are,'' said Intel's Chief Financial Officer Andy Bryant. ``In total, it's okay.''
Intel, which is notoriously tight-lipped about what information it typically gives to financial analysts, let slip a few, juicier financial details that could help Wall Street analysts and investors better gauge revenue and profit growth.
Microprocessor and chipset revenues make up roughly 75 percent of Intel's total sales and, overall, 90 percent of its revenue is ``based on semiconductor products,'' Bryant said.
Executive Vice President Paul Otellini said that sales of its processors used in laptop computers surged 46 percent in the third quarter from a year ago, while sales of its Pentium III Xeon chip used in powerful computer servers rose 80 percent in the third quarter from a year ago. He didn't provide dollar amounts of unit shipments.
Barrett said that its newer businesses -- such as networking, communications and wireless -- will rise roughly 50 percent in 2001; those units account for about 20 percent of Intel's sales, he said.
Intel's main business, its processor group that accounts for roughly 80 percent of Intel's revenue, is charged with growing sales in 2001 at roughly 10 percent, although Barrett quipped during a question-and-answer session following the presentations that Otellini, who runs the unit, is free to exceed that goal if possible.
Of all regions, Maloney said that Asia-Pacific remains the strongest for Intel and that it has eclipsed Europe as the No. 2 source of revenue for Intel by geographic region. The Americas is the biggest. ``The Asia-Pacific markets are clearly growing strongest,'' Maloney said, adding that industry estimates for PC growth there is a bit more than 30 percent.
'HUMANS BRING DEFECTS'
Intel, which has a dozen or so multibillion-dollar chip plants across the globe, plans to unveil this quarter, and on track, its much-ballyhooed Pentium 4 that will run at more than 1.4 gigahertz, said Otellini. That speed will rise to 2 gigahertz by September 2001. He added that Pentium 4 sales will top Pentium III sales early in 2002, but would like that to happen sooner because those chips are more profitable.
Also, with the move to larger, dinner-plate-sized silicon wafers from the current salad-plate-sized ones, Intel plans to upgrade its factories and make them even more automated than they are now. The semiconductor industry typically moves to larger wafers roughly every 10 years, so as Intel rolls over to the larger wafers and gear needed to handle them, it's an opportunity to rebuild things from the ground up.
As Intel upgrades its plants -- which use what it calls its ''copy exactly method,'' meaning every chip plant is built in exactly the same way -- it will move to a fully automated material handling system, integrated material scheduling and movement, Web-enabled support systems and remote diagnostic capacity, said Michael Splinter, who runs Intel's chip plants.
The more automated plants also mean fewer people. And fewer people means fewer errors, Splinter said.
``Humans bring defects,'' Splinter said.
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