For Intel, more of the same
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April 14, 1999: 8:46 a.m. ET
Chip maker to see solid profit but slowing revenue in 2Q, analyst says
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NEW YORK (CNNfn) - Intel Corp., which reported solid earnings but weak revenue Tuesday, should see more of the same ahead, a prominent technology analyst said Wednesday.
Megan Graham-Hackett, technology analyst at Standard & Poor's Equity Group, said Intel management should be able to continue cutting costs and maintain its run as one of the most profitable chip makers.
"We think there's is more to come on profits because of cost reductions," Graham-Hackett told CNNfn's program "Business Day."
But the analyst warned that in an environment of increased competition among chip makers coupled with falling personal computer prices, revenue may be weak.
"Price pressure will hurt revenues," Graham-Hackett said.
That was the case Tuesday when Santa Clara-based Intel said revenue in the first quarter rose 18 percent to $7.1 billion from $6 billion a year ago.
In contrast, first-quarter earnings grew 57 percent to $2 billion, or 57 cents a share, from $1.27 billion, or 36 cents a share, a year ago. Analysts had expected a 55 cents a share gain.
Analyzing the results, many like Graham-Hackett said the company's slower chip sales were offset by improved profit margins. Some had feared that faltering computer sales would hurt the chip maker much more.
These fears were heightened after Compaq Computer warned Monday that first-quarter sales would be about half of what analysts expected. Investors will get another look at the personal computer sector's health Wednesday when Apple reports first-quarter results after the close of trading.
Looking ahead, Intel warned that second-quarter revenue will slow. Graham-Hackett called this unsurprising, saying "typically you do have a decline from Q1 to Q2 and that's typical for the semi-conductor industry."
Still, Graham-Hackett sees Intel stock trading in the 70 to 80 range ahead.
Intel shares fell 3/4 Tuesday to close at 60-1/2.
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