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To: Don Green who wrote (67421)	3/8/2001 10:51:31 PM
From: Don Green	Read Replies (1) \| Respond to of 93625

Intel execs see no signs of recovery By Jack Robertson, EBN Mar 8, 2001 (2:28 PM) URL: ebnews.com Intel Corp., the world's biggest chip company, dropped the bombshell Thursday that its first quarter revenues will be down sequentially a whopping 25% to $6.5 billion and its once-fat gross margins will drop from 63% in Q4 '00 to about 51% this quarter. Before today's announcement, Intel had forecast that first quarter revenue would be down about 15% from the fourth quarter. "The economic slowdown affecting PC demand has continued and spread to the networking, communications and server sectors," the company said. The microprocessor titan took immediate action to cut 5,000 jobs, or 5% of its workforce by the end of the year. Andy Bryant, executive vice president and chief financial officer, told a financial analyst conference call that most of the staff reductions will come through attrition. The company last month announced cost-saving measures including the deferral of bonuses because of the slowing chip market. It said at the time that it hoped to reduce headcount through attrition, although it didn't give a specific figure. Despite the severe sales drop, Bryant said Intel will stick to its originally slated $7.5 billion capital investment budget this year. "We need to prepare for 300-mm wafer production and transition to 0.13-micron technology," he said. Intel will pare 2001 R&D spending slightly from originally planned $4.3 billion to $4.2 billion. Intel first quarter sales were hit hardest in its new communications and networking groups and in servers, said Sean Maloney, executive vice president of sales and marketing. Flash memories were especially impacted by the nation's slowdown as cell phone customers canceled or stretched out orders, he added. "The (microprocessor) Intel Architecture group was not quite as weak as the rest of our products. If you exclude server (sales), the desktop processors held their market share and ASPs through the quarter," Bryant added. Maloney denied that a series of recent Intel processor price cuts reflected greater competition in the market. "We haven't found it necessary to cut (desktop) prices beyond original plans," he said, adding that the blended ASP of all products was driven down by the slow server and flash memory sales. Maloney said the sales falloff was across all product lines and across all geographical customer regions. Although the slowdown was worse in the U.S. market, other parts of the world, including Europe, Taiwan and Korea had lower sales as well, he said. Although continually pressed by analysts to predict when a turnaround might come, both Intel officials balked at making any forecast. "I don't see any sign of recovery yet. Nothing gives a lot of hope yet," Bryant said. Maloney added that if the overall economy didn't falter further, perhaps the normal holiday sales pickup in the fourth quarter could be a welcome impetus. Both officials claimed the sales downturn wouldn't stop Intel from its commitment to make the Pentium 4 launch the fastest processor ramp in the firm's history. However, under questioning, Maloney agreed that the biggest part of the Pentium 4 ramp will come early in 2002 when Intel's new 0.13-micron process for a smaller and reduced-cost Pentium 4 chip will be in full production. Maloney said Intel's own inventories have grown but he declined to disclose any specific level. He said customer stocks, which had been at excessive levels last quarter, are being whittled back to more normal amount. Expenses (R&D, excluding in-process R&D, plus MG&A) in the first quarter are now expected to be down approximately 15% from the fourth quarter. This is lower than the previous expectation that first quarter expenses would be approximately flat with fourth quarter expenses of $2.4 billion, primarily due to lower revenue and profit-dependent expenses as well as cost cutting measures.