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To: maceng2 who wrote (170992)	6/7/2002 7:27:13 AM
From: maceng2	Read Replies (1) \| Respond to of 436258

Intel down 12% in Germany after warning (Got scared bulls? ...pb) Intel shares fell almost 12 per cent on the Frankfurt Xetra trading platform on Friday, indicating that there could be further big falls in store for chip stocks when US markets open later in the day. Intel shares were down E3.36 at E25.40 in mid-morning trade in Frankfurt after the world's largest chipmaker revised expected revenues downwards by as much as $500m because of weak European demand in its mid-quarter update late on Thursday. Shares in leading US chipmakers fell on Thursday on jitters about Intel and a Merrill Lynch downgrade of the sector, prompted by concerns about the recovery in global semiconductor markets. The Philadelphia Semiconductor Index, a basket of leading microchip and chip equipment companies was down 3 per cent and the fall in Intel and Texas Instruments weighed heavily on the broader Nasdaq index. Intel was down more than 4 per cent at the close of regular trading in New York. This decline grew to 15 per cent, dragging the shares down to $24, during extended hours trading following the company's warning. Intel forecast second-quarter revenues of $6.2bn to $6.5bn. This is significantly below its prior estimate of $6.4bn to $7bn and signifies a sequential decline in revenue from $6.78bn in the first quarter. The company also said it expected a large drop in its gross margin percentage from about 53 per cent to 49 per cent, as manufacturing utilisation levels decreased. "The lower revenue expectation is primarily due to softer-than-expected demand in Europe," Intel said. It did not announce any change to earnings. Wall Street consensus estimates for the quarter are earnings of 15 cents per share. Earlier in the day, Joseph Osha, a semiconductor sector analyst at Merrill, said the likelihood of a stronger recovery in global chip markets had been "evaporating" as the year had progressed. "We believe that the early cycle semiconductor upturn has now played itself out," he said. Merrill warned clients that current valuations of chipmakers were high. The Semiconductor Industry Association, a trade group, on Wednesday, halved its growth forecast for the global chip market this year to 3 per cent. Shares in Texas Instruments, the leading supplier of communications chips, closed down 75 cents to $27.69. Wall Street had high hopes that a corporate PC buying surge would begin in the second half of this year because of a traditional three-year PC replacement cycle. In 1999, companies around the world rushed to replace their PCs to avoid complications from the millennium bug. This would benefit Intel and many other semiconductor companies that provide memory chips and other components. However, a recent survey of US and European chief information officers by Merrill Lynch indicated that the PC replacement cycle has stretched to 40 months. Consumer PC purchases could help lift Intel and other chipmakers, but the bulk of those sales are made in the second half of the year. Texas Instruments on Thursday confirmed its prior guidance for its current quarter. This was for a sequential 10 per cent increase in revenue from the prior quarter, and pro forma earnings per share of 6 cents. The chip sector is in a slow recovery from a record 32 per cent decline in 2001. So far, chipmakers have been reporting modest sequential revenue increases this year. But a full-blown recovery is not expected until 2003. news.ft.com