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To: UnBelievable who wrote (7327)	7/17/2001 12:03:17 PM
From: UnBelievable	Respond to of 209892

Intel Seen Meeting 2Q Views, 2H View Could Be Worse 07/17/2001 Dow Jones News Services (Copyright © 2001 Dow Jones & Company, Inc.) By Donna Fuscaldo Of DOW JONES NEWSWIRES NEW YORK (Dow Jones)--Many analysts don't expect chip giant Intel Corp. (INTC) to miss the earnings consensus for the second quarter when it reports later Tuesday based on what they heard during the company's recent mid-quarter update. But more important than June results will be what the company says about the third and fourth quarters. Intel's earnings update was late enough in the quarter that the chip maker will probably meet its forecasts, said Scott Randall, an analyst at Wit SoundView. But the third quarter is starting off "pretty slow" and Intel will likely have to say revenue will be flat to slightly up, he said. While speculation had been rampant throughout the second quarter that Intel would miss expectations, the company eased investors fears when it said at the beginning of June that it expects second-quarter revenue, gross margins and expenses to be slightly below the midpoint of the projected range Intel provided April 17. In April, Intel forcast that its second-quarter revenue would be between $6.2 billion and $6.8 billion, with gross margins of 49%, plus or minus a couple of points, down from 51.7% in the first quarter. The Thomson Financial/First Call survey of analysts has Intel weighing in with earnings of 10 cents a share on revenue of $6.3 billion for the second quarter. In June, Intel also said it still expects "a seasonally stronger second half." It is those kinds of comments that analysts will be hoping to hear again from the chip giant. "The outlook is the real key for the stock," said Douglas Lee, an analyst at Banc of America Securities LLC. "What I'm hoping they will say is that they expect to grow modestly in the third quarter - 3% to 5% - fueled by seasonality returning to the PC market." He added that any growth Intel sees in the third quarter will be strictly because of the seasonality effect. Typically, the second half is the strongest period for computer chip and personal-computer makers as consumers gear up for back-to-school and the holiday shopping season. But the delay of Microsoft Corp.'s (MSFT) Windows XP operating systems until October and the slowdown in Europe could hurt Intel's third quarter, said Wit SoundView's Randall. It's hard to believe the September quarter will be robust, said Randall. While Intel will probably say third-quarter revenue will be flat to slightly higher, the wild card will be gross margins given the average selling price trends and the costs associated with Intel's migration to the .13 micron manufacturing process, he said. Ongoing Price War Investors and analysts will be honing in on gross margins when Intel reports earnings results later Tuesday. Both Intel and its rival Advanced Micro Devices Inc. (AMD) have been in an aggressive price war that severely affected AMD's second- quarter results and could put pressure on both companies margins. AMD, which beat analysts reduced expectations last week but warned that it could post an operating loss in the third quarter, said it would continue its aggressive pricing to gain more market share. Net income plunged 92% in the second quarter, but the company did ship more than 7.7 million PC processors, setting a new record. "September and December will be all about pricing," said Randall. "AMD clearly threw down the gauntlet and Intel is being equally aggressive. Unfortunately for both, it will have a great impact on their financials." Banc of America's Lee is looking for Intel to forecast gross margins to be flat to lower, but he doesn't expect gross margins to "collapse." Intel already planned to be aggressive in pricing and it has stronger products in servers and notebooks, he said. Intel "says (gross margins) will be flat to down and guides revenue up, (the stock) will go north tomorrow," said Lee. Capital Spending On top of gross margins and Intel's outlook for the second half of the year, analysts will be paying close attention to what Intel says about its capital spending plans for the year. Throughout the year Intel has not back-down on its capital spending plans for 2001, but that could change with current business conditions. "I'm curious to hear what Intel has to say about capital spending going forward in light of the comments from Applied Materials," said Jack Geraghty, an analyst at Gerard, Klauer Mattison. "Intel is almost 15% of the worldwide capital spending budget for chips." On Monday, Applied Materials Inc. (AMAT) Chief Financial Officer Joseph Bronson told analysts at Semicon West, a large semiconductor trade show being held in San Francisco, that there is a potential for a slowdown in 300-millimeter capital investments, depending on the level of customer profitability. Geraghty, who expects Intel to meet the consensus estimate for the second quarter, will also be looking for Intel to back its past comments about business picking up in the second half, although it he said the basis for optimism will come into question because customers are saying their business is still shaky. But not every analyst on Wall Street expects Intel to meet its targets for the second quarter. ABN AMRO analyst Paul Leming cut his rating on Intel Tuesday to reduce from hold and said in a research report that Intel may miss expectations or make the quarter at the expense of the third quarter. The analyst expects Intel to post 2001 earnings of 42 cents a share, down from his previous estimate of 56 cents a share and 2002 earnings of 60 cents a share, down from his previous estimate of 80 cents a share. Shares of Intel were recently trading down 1.1%, or 31 cents, at $28.81, on volume of 41 million. average daily volume is 49 million.