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Technology Stocks : Intel Corporation (INTC) -- Ignore unavailable to you. Want to Upgrade?

To: fingolfen who wrote (137770)	6/20/2001 4:25:30 PM
From: Road Walker	Read Replies (2) \| Respond to of 186894

Borrowed from the folks on the AMD thread: Intel to consider cuts unless chip market recovers By Lucas van Grinsven June 20, 2001 10:59 am PT infoworld.com LONDON (REUTERS) - U.S. semiconductor maker Intel said on Wednesday it needed to see a recovery in the chip market within six months or it would consider cutting capacity and investments next year. Intel Chief Executive Craig Barrett, traveling through Europe this week, also said delays in building factories in Israel and Ireland would not affect Intel's $7.5 billion investment plans this year, but could affect next year's budget. The U.S. company, by far the world's largest chip maker, stands out as the only semiconductor maker that has so far stuck to its investment plans, both in research as well as new factories and equipment. Alongside its investments in new factories, Intel has also said it would invest $4.2 billion in research and development. "We haven't changed guidance (to spend $7.5 billion in capital expenditure). But the slowdown has modulated demand somewhat. If the slowdown hadn't occurred we might have spent more," Barrett told journalists here. "My expectation is we'll watch what goes on in the next three to six months, and then if we don't see any improvement at that time, we'll seriously look at both the installed infrastructure we have plus what we want to spend on investment next year," Barrett added. In Israel, Intel has put off a decision on a $3.5 billion chip plant, while in March it suspended construction of a $2.2 billion facility in Ireland that may come back on stream in 2002, depending on demand. COMPUTER BUSINESS STABLE Despite cascading profit warnings from rival chip makers in recent days, Barrett saw no reason to revisit Intel's mid-term business update, made nearly two weeks ago. Intel's update caused a sigh of relief when investors learned the company stood by an earlier second quarter sales forecast of between $6.2 and $6.8 billion, down from $8.3 billion a year ago. Barrett confirmed that the core of Intel's business, which comes from computer related products such as microprocessors and motherboards, still looks stable, albeit at lower levels. "We perceive that we're at a stable bottom of this trough. We're looking for some seasonality in the second half, which should give some uptick. We're kind of bouncing along at what we perceive as the bottom at this stage," he said. But he also said the economic slowdown was hurting the launch of the new Pentium 4 microprocessor, which was quickly discounted after introduction in an attempt to bolster sales. "I wouldn't disagree that the economic slowdown has impacted the ramp of Pentium 4, and even sales in the entire computer industry," Barrett said. The upbeat market reaction to Intel's mid-term update was the result of very low expectations for an industry that is in its worst-ever slump. It has been quickly overshadowed by a host of profit warnings from chip and telecoms equipment makers, which say European customers have capped purchases, in line with their U.S. counterparts. In just seven trading days the Dow Jones European Technology Stoxx Index has fallen 21 percent from 560 points to 440 points in the wake of warnings from Finnish mobile phone maker Nokia, Canada's telecoms equipment maker Nortel and German chip maker Infineon. Intel shrugged off some of that sell-off, but has nevertheless shed 13 percent to $26.85, since its update on June 7. INTEL WARNED AHEAD OF CROWD However, Barrett suggested that rival chip makers who had warned in recent days were finally coming round to accepting a decline in revenues that Intel had forecast many months ago. "I'm not sure our forecasts are that different from other people. A year ago our revenue was up in the $8 billion plus range. The guidance we gave two weeks ago was that it was going to be in the $6 billion range. To me that's a pretty substantial drop," Barrett said. The fact that competitors were now forecasting sales declines similar to Intel's, lent some support to the U.S. group's heavily criticized forecasting unit, which forced the company to come out with a string of warnings last year. But Barrett came to its defense when he said no one had forecast the severity of the decline when it hit late last year. Meanwhile, Intel had a reasonably clear outlook on its core computer business, which generates some 80 percent of revenues, thanks to the maturity of that industry, which has gone through many downturns and improved its inventories management. "The computer industry is relatively stable from an inventory standpoint and a sales-out standpoint. We have good insight into the inventories that our big customers have. There doesn't seem to be a stack-up," Barrett said. Intel's much smaller business for communications components, which generates the remaining 20 percent of sales through products such as opto-electronic chips and flash memory for cellphones, was in dire shape. "The communications side of the business is still in a dreadful state of flux. Cisco and Nortel are very good customers of ours and when they say they have many, many months of inventory on hand of our products, we have some exposure." "The good news is that that part of our business is only 20 percent of business at this time," Barrett added.