Gene, I agree... this news had leaked. Brian, thanks for the earlier story...
Another take is below....
Intel Pushes Back Next-Generation Chip to Mid-2000
By Therese Poletti
Reuters
SAN FRANCISCO (May 29) - Intel Corp. has told its customers it is delaying production of its next-generation computer chip, code-named Merced, by at least six months, the world's leading semiconductor maker said Friday.
Intel said it is delaying volume production of the microprocessor, the heart of the computer, to mid-2000 from sometime in 1999.
Intel said it underestimated how much time it needs to test the chip before it can ship it in volume to customers, who plan to use the microprocessor in high-end workstations and servers, the machines that run computer networks.
The delay is not expected to have a dramatic impact on computer makers, most of which will offer high-end systems based on chips other than Intel's, analysts and industry executives said. Intel chips power nearly 90 percent of PCs worldwide. The Merced is intended to help Intel make inroads into the high-end computer market, currently dominated by other microprocessor makers.
Some analysts said they had expected volume production of the Merced chip sometime in the second half of 1999, but that they had not predicted that Merced would move into the mainstream PC market until sometime in 2001.
''We have reached a point in the development cycle where the product is really starting to take shape,'' Stephen Smith, vice president and general manager of Intel's Santa Clara (Calif.) Processor unit, said in a statement.
''At this point, we have more precise schedule and product data, which allows us to better understand the scope of the product development, and we have communicated the new schedule to customers and the industry.''
The Santa Clara, Calif.-based company has been working for several years with its partner, Hewlett-Packard Co., on the chip and its new design, which will be Intel's first architecture to diverge from its x86 microprocessor series.
The chip will be Intel's first to use a 64-bit instruction set, to process more computing instructions, vs. the current 32-bit instruction set in the higher-end Pentium II.
Intel said it and Hewlett-Packard have designed the chip and produced a functional model.
The chip giant announced the delay after financial markets closed. Its stock ended the day down $2.06 at $71.44 on Nasdaq. Hewlett-Packard closed down $1.31 at $62.56 in composite New York Stock Exchange trading.
REUTERS Reut18:05 05-29-98
Copyright 1998 Reuters Limited. All rights reserved.
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Prices and Future Earnings Have Investors Jittery Over Tech Stocks
By Huw Jones
Reuters
NEW YORK, NY (May 29) - Investor jitters over U.S. technology stocks are unlikely to subside soon amid a mixed outlook for second-quarter earnings, analysts say.
While software earnings may prove to be a bright spot, analysts said, soft pricing in the personal computer and semiconductor industries and turmoil in Asia are likely to depress hardware profits.
''The main reason for weaker tech earnings is a slowdown in semiconductor earnings, primarily because of Asia and price competition,'' Joseph Abbott, research manager at financial research firm I/B/E/S/, said in a recent interview.
Asia's slowdown has exacerbated the effect of moves by PC makers to match price cuts by companies such as Compaq Computer Corp. that are seeking to offload high inventory.
Hewlett-Packard Co.'s mid-May report of a 13 percent drop in fiscal second-quarter earnings showed those problems have yet to abate.
In addition, this week's surge by the dollar to seven-year highs against Japan's yen could put further pressure on tech company revenues in the region when translated back into dollars.
Earnings for computer hardware companies are expected to fall 6 percent in the quarter after a 15 percent first-quarter drop, according to research firm First Call.
''Asia is clearly the biggest factor in overall softening that has left an impact over here,'' said Chuck Hill, First Call's director of research.
Semiconductor earnings will be hardest hit in the current quarter, analysts said.
''These are the worst of the pack,'' Abbott said.
I/B/E/S expects year-on-year chip sector earnings to fall 31 percent in the second quarter after a 25 percent first-quarter tumble.
National Semiconductor Corp. and Analog Devices Inc., an integrated circuit maker, are among those in the group that have already warned their earnings would fall short of expectations.
Even bellwether companies are facing declines. Motorola Inc.'s earnings are expected to fall 65 percent, and world chip-making leader Intel Corp., which announced 3,000 job cuts in April, faces a 16 percent drop from the second quarter of 1997, Abbott said.
Motorola issued a warning about its second-quarter earnings with its first-quarter report. It partly blamed a slowdown in Asian sales.
With the second-quarter profit-warning season barely under way, more tech companies may issue so-called pre-announcements before results finally roll in, beginning in mid-July.
Consequently, investors are being more choosy about which type of tech stock they are buying, analysts said, and some are looking to software companies as a haven.
''We have been more heavily concentrated in software this year, and the companies we do own are leaders in their field,'' said Alan Loewenstein, assistant portfolio manager specializing in tech stocks at John Hancock Funds.
''We have reduced our exposure to hardware and computer chips,'' Loewenstein added.
According to First Call, computer software sector earnings are expected to grow 22 percent from year-ago levels, only a minor slowdown from the 24 percent increase in the first quarter.
The biggest boosts to the software sector are expected to come from Microsoft Corp., PeopleSoft Inc. and I2 Technologies Inc., I/B/E/S said.
However, analysts cautioned that investors in this sector may become more nervous as the federal and state governments' antitrust lawsuit against Microsoft casts a pall over the group.
Another bright spot is the office and communications equipment sector, where earnings are forecast to grow 25 percent, up from 16 percent in the first quarter, due in large part to solid profits at Lucent Technologies Inc., I/B/E/S said.
But analysts said even the bright spots may not be enough to pull the technology-studded Nasdaq composite index out of a slump that began about two weeks ago amid bearish analyst comments, warnings about upcoming results, and a renewed slide in emerging markets, particularly Asia.
''We expect the Nasdaq to continue to underperform,'' said Gary Kaltbaum, technical analyst at J.W. Charles/CSG.
''We believe the technology stocks are the most vulnerable sector even after last week's plunge,'' Kaltbaum said. ''Several of the frothy Internet stocks have topped. It wouldn't surprise us to see a long, slow drop from here.'' REUTERS Reut13:52 05-29-98
Copyright 1998 Reuters Limited. All rights reserved.
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