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To: Jumper who wrote (3051)	7/15/1998 3:30:00 PM
From: Joseph G.	Respond to of 86076

This one is for loughs too. Unless one wants to learn to lie, ehh, to spin, that is. <<EARNINGS UPDATE: ANALYSTS LOOK BEHIND INTEL'S NUMBERS By Peter D. Henig Red Herring Online July 14, 1998 Intel (INTC) took a chip shot from the earnings bunker, but left it 2 cents short. The semiconductor giant reported flat second quarter 1998 revenues of $5.9 billion and earnings of $1.2 billion, or 0.66 per share, down significantly from second quarter 1997 earnings of 0.92, and off 8 percent from first quarter 1998 EPS of 0.72. However, analysts said the numbers behind the numbers indicate that Intel's outlook remains mostly positive. According to the company, revenue in the Americas and Japan was higher than last quarter, while Asia-Pacific was relatively flat with the first quarter of 1998, and Europe was somewhat lower. Describing the current business climate as "difficult," CEO Craig Barrett tried to reassure shareholders and the investment community that Intel was indeed remaining competitive. "We have cut costs, extended our product line, and are ahead of schedule in using new manufacturing processes. As a result, we have increased Intel's competitiveness substantially." Comparing apples to oranges Wall Street didn't seem too dismayed that earnings per share missed First Call's estimate of 0.68 by 2 cents, given that the second half of the year tends to be seasonally stronger for the computer industry, and that, at least for this quarter, Intel was perhaps a victim of its own cost-cutting success. Despite settling 1.68 points lower at 80.68, Volpe Brown Whelan analyst Eric Rothdeutsch was confident Intel would deliver, upgrading the stock from Neutral to Buy on Tuesday. Ashok Kumar, analyst with Piper Jaffray, was equally pleased. "It was in line with our expectations," said Mr. Kumar, who just recently raised his second quarter earnings forecast to 0.70, and maintains a Buy recommendation on the stock. Mr. Kumar, noting that second quarter earnings of 0.66 reflected an inventory write down of 0.04 due to further transition to the Pentium II chip and charges associated with Intel's prior acquisition of Digital Equipment's (DEC) semiconductor manufacturing operations, felt that essentially the company had met his 70-cent estimate. Robert Chaplinsky, an analyst with Hambrecht & Quist, was also on board, emphasizing that investors should look beyond the numbers to really understand how Intel is doing. "On an operating basis, they were a little below consensus, but that's really not an apples to apples comparison," said Mr. Chaplinsky. "They actually performed better than expected in terms of cost reductions, which hurt their bottom line, but which will help them in the long run." Intel stated that gross margins had fallen to 49 percent from 54 percent in the first quarter, although the company attributed at least two points of the reduction to the "higher than normal inventory writedowns." Mr. Chaplinsky further noted that Intel saw a significant progress in their notebook chip business, and actually experienced improvement in Japan. "With all of these things, it looks like the third quarter could be pretty good," said Mr. Chaplinsky. H&Q maintains a Buy rating on the stock. Forecast the future In its earnings release, Intel also made several forward-looking statements detailing its financial future. In prepared comments, Intel stated it "expects revenue for the third quarter of 1998 to be flat to slightly up from second quarter revenue of $5.9 billion. Consistent with the company's earlier expectations, second-half revenue is expected to be greater than the first-half revenue." The company also stated that gross margins should improve over the long term, and that it will continue to reduce its workforce by up to 3,000 employees. >>