UPDATE 3-Intel profit up but revenue forecast disappoints
Tue Oct 18, 2005 08:13 PM ET
(Adds more analyst comment, details from conference call, updates after-hours stock price)
By Duncan Martell
SAN FRANCISCO, Oct 18 (Reuters) - Technology bellwether Intel Corp. (INTC.O: Quote, Profile, Research) on Tuesday said quarterly net profit rose but supply constraints crimped the revenue forecast at the world's biggest chipmaker, disappointing some investors, and shares fell 3 percent.
Andy Bryant, chief financial officer for Intel, said in an interview that its ability to make enough microprocessors to satisfy demand had improved from last quarter, but it was still somewhat hampered in making enough chipsets -- collections of individual chips -- to meet demand.
"You've got this supply issue and people want to see how they execute through the quarter," said RBC Capital Markets analyst Apjit Walia, referring to the chipsets. "I'm confident their chipset supply issues will get resolved."
Eric Ross, an analyst with Think Equity Partners said: "Those are the things people will be looking at in order to knock the stock down," referring to a slight rise in inventories in the third quarter and the sales forecast.
Intel said third-quarter net income rose to $2.0 billion, or 32 cents per share, from $1.91 billion, or 30 cents per share, a year earlier. The results included an approximate 2 cent-per-share charge for a legal settlement. Revenue rose 18 percent to $9.96 billion from $8.47 billion and was up 8 percent in the prior quarter.
Results also included 2 cents per share for a legal settlement and 4 cents per share in tax expenses to repatriate money earned outside the United States.
Analysts expected a net profit per share, on average, of 33 cents per share, on revenue of $9.92 billion, according to Reuters Estimates. In September, Intel narrowed the range of its quarterly revenue forecast but left the midpoint unchanged, saying business remained within expectations.
On a conference call, Intel CEO Paul Otellini said Intel had record shipments for microprocessors, chipsets, flash memory and other products, and set records in several countries, including China and India, two key and fast-growing markets for Intel and other technology companies.
He said that shipments of its dual-core processors -- essentially two chips on a single piece of silicon -- had topped 1 million units so far this year and the company plans to more than double that by year end.
Still, investors remained concerned by what appeared to be a lackluster forecast from Intel, which has more than 80 percent of the microprocessor market, for the holiday-sales-fueled fourth quarter.
"We'd all like to believe Intel's forecast is conservative, but I don't think it behooves them to be conservative," said Raymond James & Associates analyst Ashok Kumar, referring to general economic concerns. "I would argue they're painting a realistic picture."
Bryant said the company, while it had a seasonally stronger third quarter, expects a somewhat less than seasonal fourth quarter. Added together, he said the two should balance each other out, producing a second half of the year that matches seasonal growth patterns.
For the current quarter, Intel said it expects revenue in a range of $10.2 billion to $10.8 billion, the midpoint of which is $10.5 billion. Analysts currently expect Intel to have fourth-quarter revenue of $10.7 billion. Intel, as usual, did not issue a per-share earnings forecast.
The Santa Clara, California-based company also said it expects fourth-quarter gross margin of 63 percent, plus or minus a couple of points, compared with 59.7 percent in the third quarter.
"There's no question that if I had more capacity I could've shipped more chipsets," Bryant said.
Based on Tuesday's close, shares of Intel have risen less than 2 percent so far this year, compared with a 1.4 percent increase in the Philadelphia Stock Exchange semiconductor Index, of which Intel is a component. Shares of far smaller rival Advanced Micro Devices Inc. (AMD.N: Quote, Profile, Research) have fallen 4.4 percent in the same period.
Shares of Intel slipped 3.2 percent in after-hours trade after the earnings report. In regular trade on Nasdaq on Tuesday, the stock rose 26 cents, or 1.1 percent, to close at $23.72. |
