> did they actually say it was due to weak demand in the p.c. sector or just
> say weak oem demand. thats the quote I saw.
Here's what the WSJ said in its opening sentence on Pg1: "INTEL LOWERED its revenue and profit expectations for the first quarter because of weakening PC demand." The article went on further to say "Intel said it can't yet specify the reasons for weakening PC demand. Analysts said causes could include the Asian financial crisis, a seasonal post-Christmas slowdown, the lack of new software to distinguish the latest and most expensive computers, weak demand for portable computers, or a transition to low levels of inventory among most computer makers. Intel alsocould be feeling the effects of competition, particularly for low-priced chips used in sub-$1,000 machines."
I know its been posted already, but here's the full WSJ article:
Intel Lowers Forecast for Profit,
Revenue on Weak PC Demand
Shares Fall Sharply in After-Hours Trading;
Chip Maker's Warning May Impact Other Firms
By DEAN TAKAHASHI
Staff Reporter of THE WALL STREET JOURNAL
In a jolt to Wall Street, Intel Corp. lowered its revenue and profit
expectations for the first quarter because of weakening demand for personal
computers.
The announcement by the Santa Clara, Calif., chip giant is an ominous sign
of new problems in the world-wide PC market, and comes despite the
rising popularity of machines priced at less than $1,000. The low-cost
systems were believed to be propping up unit demand for hardware and
helping suppliers, such as Intel, which make microprocessors that act as the
brains in most PCs.
Intel broke its news after the stock
market closed. Its shares had gained
$1.125 to $86.4375 in Nasdaq
Stock Market trading, but plunged to
$77.125 in after-hours trading,
according to Instinet. That would
translate to a $15 billion cut in Intel's
market capitalization.
Intel said it can't yet specify the
reasons for weakening PC demand.
Analysts said causes could include the
Asian financial crisis, a seasonal
post-Christmas slowdown, the lack of new software to distinguish the latest
and most expensive computers, weak demand for portable computers, or a
transition to low levels of inventory among most computer makers. Intel also
could be feeling the effects of competition, particularly for low-priced chips
used in sub-$1,000 machines.
"The weakness is across the board," said Howard High, a spokesman for
the company. He added that orders from large PC makers are down. "We
don't have good data on the causal effect."
Lowering Forecast 10%
Intel previously had expected first-quarter results to be flat with
fourth-quarter revenue of $6.5 billion. Now, the company said it will miss
that number by 10%. That indicates revenue of $5.85 billion, the lowest
since the third quarter of 1996.
Intel also said Wednesday that its gross profit margin will be 53% for the
quarter. Earlier, it had said gross profit would be "a few points" lower than
the fourth quarter's 59%.
Ashok Kumar, an analyst at Piper Jaffray in Minneapolis, calculated that
Intel's first-quarter chip sales will be off about 2.5 million units from the
fourth quarter. Coupled with falling average selling prices, that means there
is an "across-the-board malignancy of demand" that goes beyond seasonal
factors, he said.
Robert Chaplinsky, an analyst at Hambrecht &
Quist in San Francisco, argued that the
announcement signals that lower PC prices
aren't necessarily causing PCs to reach more
people. "It shows that demand isn't elastic," he
said.
The question of PC penetration is crucial for
the industry, which is hoping to expand into
less-affluent households. Recent data from
market researchers Computer Intelligence and International Data Corp.
have a different view, noting in recent studies that PC penetration in U.S.
households is creeping up from a plateau of around 40% to about 45% or
50%. In addition, Computer Intelligence reported that U.S. retail sales of
PCs boomed in January.
'Price Compression'
Intel has reorganized to focus on the low-end market. But Nathan
Brookwood, an analyst at Dataquest, said software applications have
stagnated so that even the fastest computers offer little benefit to the speed
of many mainstream applications. He also noted that sub-$1,000 computers
are causing "price compression," or a cascading effect on the prices of other
PCs, where PC makers must also lower prices on other computers, such as
cutting a $2,000 computer to $1,500.
Drew Peck, an analyst at Cowan & Co. who was already bearish about
PC demand, said he was surprised at Intel's earnings warning and added
that it bodes ill for other chip makers.
"This is not the last preannouncement you will see in the semiconductor
industry," Mr. Peck said. "But it certainly is dramatic. It isn't strictly an Intel
problem." |
