Intel Drops 19% on Reduced 2nd-Qtr Sales Forecast (Update10)
By Cesca Antonelli
Santa Clara, California, June 7 (Bloomberg) -- Intel Corp. shares tumbled 19 percent after the world's biggest computer-chip maker lowered its second-quarter sales forecast, signaling a slower recovery for electronics demand worldwide.
Intel dropped $5 to $22, its lowest price since October. The drop erased $33.4 billion in market value. The shares of rivals Advanced Micro Devices Inc. and Texas Instruments Inc. and chip- equipment maker Applied Materials Inc. also fell.
Weakness in Europe and a customer shift toward cheaper chips led to the shortfall, surprising investors who expected some improvement in corporate demand. Sputtering sales at Intel, whose chips power 80 percent of new personal computers, may mean that the global PC and software industries still are mired in a slump that started more than 18 months ago, shareholders said.
``A lot of people felt like they had a strong handle on their business, and these guys are missing by a country mile,'' said Alex Vallecillo, who helps manage $30 billion at Intel shareholder Armada Funds. ``This adds a boatload of confusion to an environment that's already very confused.''
Second-quarter sales will be $6.2 billion to $6.5 billion, Chief Financial Officer Andy Bryant said on a conference call late yesterday. That compares with the company's April estimate of $6.4 billion to $7 billion.
``When Intel makes a statement like this, the hope for a recovery is dissipated,'' said Simon Kirton, who helps manage $3.6 billion of European equities at Aberdeen Asset Management in London.
Slowest Quarter
Intel's forecast calls into question the state of the market for everything from chips to PCs to semiconductor equipment, investors said. The second quarter typically is the weakest of the year for PC sales, and in recent weeks some Intel customers have predicted that sales this period will decline.
Hewlett-Packard Co., the world's largest PC maker, expects sales to drop 5 percent to 7 percent this quarter from the previous period, Chief Financial Officer Robert Wayman said this week.
A rebound may not take hold until next year because corporations already have budgets in place and are unlikely to spend more on PCs this year, Michael Dell, chief executive of No. 2 PC maker Dell Computer Corp., said last month. Dell shares fell 19 cents to $26.28.
``Tech budgets are under a lot of scrutiny,'' said DeAnne Steele, who helps manage the $400 million BNY Hamilton Large Cap Growth Fund at Bank of New York, which owns 360,000 Intel shares. ``Some chief information officers are trying to come in under budget.''
PC Sales
If consumers and businesses shun PCs, there's no demand for processors from Intel and Advanced Micro or memory from chipmakers such as Micron Technology Inc. Semiconductor-equipment makers such as Applied and KLA-Tencor Corp. don't get as many orders for their tools if chipmakers don't have profits to support spending.
Advanced Micro dropped 80 cents, or 7.5 percent, to $9.81. Applied fell 30 cents to $20.62, while Texas Instruments declined $1.29 to $26.40. The Philadelphia Semiconductor Index fell 2.8 percent to 440.96.
``Intel confirms we're still some time away from a chip-market recovery,'' said Corne van Zeijl at Zurich Leven, in the Hague, who invests 2.4 billion euros and owns Royal Philips Electronics NV shares.
The global chip market is forecast to grow 3.1 percent in 2002, compared with an earlier estimate of 6 percent, the Semiconductor Industry Association said this week. Chip sales fell 33 percent last year to $152 billion, their worst decline, after a 31 percent rise in 2000, according to researcher Gartner Inc.
Other chip-equipment makers' shares fell. Lam Research Corp. dropped 23 cents to $21.14, and KLA-Tencor declined 57 cents to $49.39. Teradyne Inc. fell 76 cents to $26.08, and Novellus Systems Inc. declined 90 cents to $40.
Intel shares have fallen 30 percent this year and trade at 31 times next year's estimated per-share earnings.
Gross Margin
Intel's second-quarter gross margin, the percentage of sales left after paying production costs, will be 49 percent, missing the 53 percent target given in April, the company said.
Lehman Brothers Inc. analyst Dan Niles reduced his second- quarter profit target to 11 cents a share from 15 cents and his 2002 estimate to 60 cents from 70 cents. Banc of America's Doug Lee cut his 2002 forecast to 55 cents from 68 cents.
STMicroelectronics NV, Europe's largest chipmaker, today said it's sticking with an estimate for 10 percent sales growth in the second quarter compared with the first. Munich-based Infineon Technologies AG said it stands by an April forecast in which it said demand was starting to recover.
Both stocks fell more than 6 percent. Japanese chip-equipment maker Tokyo Electron Ltd. dropped 4.3 percent. Taiwan Semiconductor Manufacturing Co. and United Microelectronics Corp., which make chips for other companies, fell more than 6 percent.
``If Intel -- being the bellwether -- is having problems, then who else is having problems?'' said Alan Loewenstein, co-manager of the John Hancock Technology Fund, which manages $754 million and owns Intel shares. |
