This will have to have an impact on the overall tech sector tomorrow... perhaps....
Tuesday January 12 8:41 PM ET
Intel's Earnings Top Even Highest Of Analyst Views
By Duncan Martell
PALO ALTO, Calif. (Reuters) - Technology bellwether Intel Corp. (Nasdaq:INTC - news) said Tuesday its fourth-quarter earnings rose 18 percent, easily topping even the highest of analysts' forecasts, as strong sales of all its product lines buoyed results for the world's largest computer chipmaker.
Intel said net income rose to $2.1 billion, or $1.19 a share, up 18 percent from $1.7 billion, or 98 cents, a year ago. The results were ahead of the $1.07 a share expected by Wall Street analysts surveyed by First Call Corp. Revenue rose 17 percent to $7.6 billion from $6.5 billion a year earlier.
''It was a great quarter for us with record revenues in many of our product areas,'' said Paul Otellini, head of Intel's architecture business group, on a telephone conference call.
The results also surpassed the ''whisper number'' of $1.10 a share circulated among traders and follow Intel's news in November that its fourth-quarter results would be higher than analysts were first expecting. The most recent estimates for Intel's fourth quarter ranged from $1.03 to $1.15 a share.
''This was an incredibly strong quarter,'' said Duane Eatherly, a money manager at BancOne Investment Advisors, which owns Intel stock. ''Also, we think they're being classically conservative on their guidance for the first quarter.''
Santa Clara, Calif.-based Intel had record revenues in the Asia-Pacific region, except Japan; Europe and in the Americas. In addition, unit shipments of microprocessors to personal computer makers, chipsets and so-called flash memory, and sales of some of its networking gear, all set records.
Even though Intel was helped by robust holiday sales of its microprocessors -- the brains of personal computers -- it forecast that first-quarter revenue would be down from the $7.6 billion reported for the fourth quarter. The first quarter is typically slower than the fourth.
''You don't want to be too aggressive in giving forecasts for the first quarter,'' said Ashok Kumar, an analyst at Piper Jaffray. ''They have bookings (orders) to support a sequentially flat quarter but it's too early to say the first quarter will be up from the fourth.''
Intel stock, which closed down $4.19 at $135.56 on the Nasdaq, surged in after-hours trading to as high as $139 a share. The stock has nearly doubled since September.
''This was a good quarter and the gross margin was much better than I was expecting,'' said analyst David Wu of ABN Amro Chicago Corp. in San Francisco. Gross margin, the percentage of revenue minus product costs, was 58 percent in the quarter.
Intel's revenue guidance for the first quarter, among the most closely watched numbers in the lightning-quick technology industry, was in line with most analysts' expectations.
But the company's guidance for gross margins for all of 1999 was higher than expected, some analysts said. Intel is now forecasting gross margins to be about 57 percent in 1999, plus or minus a few points, up from 54 percent in 1998.
While good news for Intel investors, Intel's forecast that it planned to cut capital spending to $3 billion this year from $4 billion last year could hurt makers of semiconductor equipment, such as Applied Materials Inc. (Nasdaq:AMAT - news)
Intel Chief Financial Officer Andrew Bryant said the company would pare spending on test and measurement equipment and on new buildings, among other areas. He added that Intel shipped less of its low-cost Celeron processors than it had expected, but that demand for its higher-end, more expensive Pentium II chips was far more robust than it had forecast.
That, coupled with continued cost-cutting, helped boost the gross margin in the fourth quarter. During the quarter, Intel took the wraps off speedier Celeron chips, designed to regain marketshare lost to rival Advanced Micro Devices Inc. (NYSE:AMD - news), and it introduced faster Pentium II and Pentium II Xeon chips.
''AMD has their work cut out for them because they're going to have Intel's full fury coming after them,'' said analyst Dan Niles at BancBoston Robertson Stephens. ''Intel is doing about everything right.''
Intel is also getting it right on the high end of the market, with its Xeon chips that are designed for powerful computer workstations and servers. ''Initially, their execution was not stellar, but those issues are now resolved,'' said analyst Mark Edelstone at Morgan Stanley Dean Witter.
Intel earlier had trouble making enough of the Xeon chips, of which it sold several hundred thousand in the quarter, Edelstone estimated, adding that it shipped a total of 26.5 million microprocessors, composed of 7 million Celerons and about 16 million Pentium II chips.
Intel gets about 77 percent of its revenue from selling microprocessors.
For all off 1998, Intel had net income of $6.1 billion, or $3.45 a share, down 13 percent from $6.9 billion, or $3.87, in 1997. Revenue rose to $26.3 billion from $25.1 billion. |
