Reuters Technology Report
Intel's Barrett: Profit Prospects Cloud Tech Growth
By Ben Klayman
ATLANTA (Reuters) - Information technology spending will not improve until corporate profits do, and that won't happen soon, Craig Barrett, the chief executive of Intel Corp. (NasdaqNM:INTC - News), the world's largest chip maker, said on Tuesday.
"Until you see some degree of corporate profitability in the U.S., Western Europe and Japan, I think you're going to see limited IT investment," Barrett told Reuters at Supercomm, a major telecom equipment conference held annually here.
Barrett's comments echoed those by Hewlett-Packard Co. (NYSE:HPQ - News) Chief Executive Carly Fiorina who told analysts at a meeting in Boston on Tuesday that, "We are seeing a slower recovery in IT spending than any one of us would have liked."
"I don't think there's much indication of corporate profitability and so Carly's comment I think is probably targeted along those lines," he said in an interview. "We'll be a lagging indicator to the economic recovery in the U.S. It will be a form of trickle-down economics."
Earlier in the week, another Intel executive, Mike Splinter, head of sales and marketing, said at the Computex computer show in Taipei that he saw no signs of recovery in global technology demand beyond normal seasonal patterns.
Splinter also said that while corporations appeared to be replacing PCs at a normal rate, layoffs and hiring freezes were keeping corporate IT spending low.
"The thing that's going to improve IT spending is companies hiring new workers," Splinter told reporters in Taipei on Monday. "What's fallen off because of all the layoffs is computers for new people."
NO COMMENT ON SECOND-QUARTER FINANCIALS
Barrett declined to discuss how the company was doing in the second quarter, but several analysts expect it during Thursday's mid-quarter update to adjust the revenue forecast to the low end of the previously provided range of $6.4 billion to $7 billion based on expected weaker demand.
Intel will update analysts and investors on Thursday after U.S. markets close to fine-tune guidance it gave in April, when it reported first-quarter results.
Santa Clara, California-based Intel last week cut prices on its microprocessors, the brains of personal computers, by as much as 53 percent, taking advantage of manufacturing efficiencies and making room for new, speedier processors.
Its cross-county rival, Advanced Micro Devices Inc. (NYSE:AMD - News), quickly followed suit in what is a spring ritual for the two companies, and dropped prices on its own Athlon and Duron chips by 7 percent to 52 percent.
Several analysts have recently credited Sunnyvale, California-based AMD for its smooth execution, and competitive Athlon chips compared to Intel. Some performance measures put AMD's chip performing ahead of Intel's Pentium processor on certain applications.
TELECOMMUNICATIONS TURMOIL
Barrett also said the telecommunications industry is in a "Catch-22" situation, where companies are cutting spending, waiting for the market to rebound, but that will not occur until they start spending again.
"The only way to get out of the Catch-22 is you don't do the same thing over and over again, which is insanity, and expect a different result," he said.
"Having been through nine complete up-and-down cycles (in the semiconductor industry), I know there's going to be a 10th one, and I know the ninth one, which we're in the middle of now, will end," Barrett added. "I don't bite my lip, I just write the checks for the R&D guys."
In a speech earlier in the day to industry executives, investors and analysts, Barrett said the computing and communications industries were converging and that the communications industry needed to start spending again to break out of its slump.
He compared the downturn to other historic slowdowns in steel, automobiles and other industries, where early exuberance was followed by a slump and then extended, but more measured, growth after that.
Despite all the bad news in the industry, the truth remains that growth in Internet use has not abated, and that will fuel the development of new products and services to serve both businesses and consumers, Barrett said.
(with reporting by Duncan Martell in San Francisco)
biz.yahoo.com |
