Paul, there's more to the Intel story.
Regards,
Tom
msnbc.com
LATE THURSDAY, Intel said demand for its
microprocessors has been better than expected, and more in
line with the usual seasonal year-end pick up. The world’s
largest semiconductor maker nudged its fourth quarter sales
targets to a range of $6.7 billion to $6.9 billion. That’s a bit
higher than the $6.2 billion to $6.8 billion target the company
set when it reported third-quarter results in October.
The good news from Intel was echoed by the
company’s main rival, Advanced Micro Devices, which said
it also expected higher sales in the fourth quarter, helped by
the recent launch of a new processor line. AMD said it
expects to return to profitability in the second quarter of
2002.
“The stronger than expected PC processor sales, even
in the face of flash memory sales now expected to be no
better than flat, are expected to drive overall fourth-quarter
sequential revenue growth into the 10 percent or better range
when compared to third-quarter sales of $765.87 million,” the
company said.
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AMD also said that cost cutting efforts together with
revenue growth will help to reduce the operating loss in the
fourth quarter from the level in the previous quarter.
The positive comments had been widely expected by
Wall Street analysts, who have been nudging their revenue
estimates higher in the past week or so. Sales of Intel’s
Pentium 4 chips, the company’s newest and fastest, have
been especially brisk. Intel has been pushing hard to shift
over completely to the Pentium 4 and phase out the less
expensive Pentium III chip by the end of the year. Robertson
Stephens analyst Eric Rothdeutsch estimates that Intel gets
an average $210 per Pentium 4 chip, compared with an
estimated $140 for the Pentium III.
Intel shipped about 800,000 Pentium 4 chips in the first
quarter, 1.8 million in the second quarter and 6.5 million in the
third quarter, according to Lehman Brother analyst Dan
Niles. And Intel has forecast that it will ship twice as many
Pentium 4 chips in the fourth quarter than in the third.
Analysts report that, after steep price cuts earlier this
year, prices have held up better than expected in the latest
quarter. Prices have also gotten support form what appears
to be a temporary cease fire in Intel’s bruising price war with
AMD — driven largely by a shortage of some Pentium 4
models.
But it turns out that the shortage of those Intel chips was
not so much the result of too much demand as it was a
temporary bottleneck in the testing phase of Intel’s
manufacturing process. The shortage helped Intel keep
prices firm — and helped boost revenues. However, once
that manufacturing bottleneck eases, prices will continue
falling unless demand picks up.
PC SALES TOO?
While sales may be firming, some analysts are
concerned that the strength in demand for Intel and AMD
processors may not be matched by demand for the personal
computers built around them. Niles says there’s still a fairly
big disparity in the reports he’s getting from Intel and from
Dell.
“It comes down to how many PCs they sell,” he said.
“If they don’t sell, the first quarter is going to be much
worse” because PC makers will cut back on orders until they
clear their backlog of unsold computers.
With the global economy expected to remain sluggish at
least through the middle of next year, it could take awhile to
clear any backlog. And even when the economy recovers,
say analysts, it could be slow going for much of the chip
industry’s biggest markets.
“We continue to expect the mature markets Japan and
Europe to continue to contract next year,” U. S. Bancorp
Piper Jaffray technology analyst Ashok Kumar told CNBC.
“So the growth is highly dependent on emerging markets like
China and India.”
National Semiconductor Corp. Thursday also had some
good news for investors, reporting a fiscal second-quarter
loss that was less than expected. The company said sales of
analog chips improved slightly and that it is making chips
more efficiently, even though the diversified chipmaker’s
revenue continued to suffer.
For the quarter ended Nov. 25, the Santa Clara,
California-based company reported a loss of $46.6 million, or
26 cents a share, compared with a year-ago profit of $106.7
million, or 56 cents a share. Sales fell 38 percent, to $366.5
million from $595 million.
The company topped expectations for a loss of 31 cents
a share, within a range of a loss of 24 cents to 35 cents a
share, according to Thomson Financial/First Call. Revenue,
according to seven analysts surveyed, was pegged at $357.1
million.
National, whose chips are found in cell phones,
flat-panel displays, and other electronic devices, also said it
expects third-quarter sales to be comparable with
second-quarter levels, in a range of $350 million to $370
million.
“That’s somewhat positive, given that the February
quarter is a traditionally slower quarter,” said Robertson
Stephens analyst Tore Svanberg. “My numbers will probably
go up a tiny bit, which is actually the first time I’ve raised
numbers in a very long time,” for any of the companies he
covers.
Industry-wide, chip sales in October stood at less than
half the $21-billion-a-month rate hit when the the industry
peaked in the middle of last year. But chip stocks have been
moving higher on hopes that a turnaround may be on the
horizon for the battered sector. The Philadelphia
Semiconductor Index, which includes both chipmakers and
chip-equipment makers, is up 61 percent since Oct. 1, far
outpacing the Nasdaq Composite Index.
Investors were also hopeful that the glut of memory
chips — and the collapse in prices — may be easing. On
Wednesday, Korea’s Samsung said it had raised contract
chip prices by some 10 percent early in December and chip
maker Hynix signaled it would raise prices by 10 percent to
20 percent.
Hopes of a rebound in the memory chip market were
stoked by news that Micron, the No. 2 memory chip-maker
and troubled Hynix, the No. 3 player, are in merger talks.
German chipmaker Infineon Technologies and Toshiba Corp.
are also in talks about combining their money-losing
memory-chip making operations.
Memory chip prices have fallen so low this year that
they actually now sell for less than it costs to make them.
Reuters contributed to this story. |
