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News > Technology
Intel reaffirms 3Q guidance
September 6, 2001: 6:28 p.m. ET

Chipmaker expects its sales and profit to land within company' s targeted range
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NEW YORK (CNNfn) - Intel Corp. on Thursday stood by its previous estimates for third-quarter revenue and gross margin, noting that the results are likely to come in near the lower end of the ranges executives provided in July.

When Intel reported its second-quarter results on July 17, Andy Bryant, Intel's chief financial officer, told analysts to expect third-quarter revenue ranging between $6.2 billion and $6.8 billion. He said the company's gross margin, the percentage of sales remaining after subtracting product costs, would be 47 percent, plus or minus a couple of points.

During a teleconference with analysts after the close of trading Thursday, Bryant said revenue for the quarter is likely to be "slightly below the midpoint" of that range. At the same time, he said the gross margin will be "below the midpoint" of the previously stated range.

"On revenue, all the businesses are almost spot-on, but if I had to make a call today, I'd say I'm going to be a little bit below the midpoint," he said.

"On margin, I'm not as close," Bryant added. "I don't think I'm at the bottom of the range, but I also think it's noticeably not at the midpoint."

After falling $1.37 on Nasdaq ahead of the news, shares of Intel (INTC: down $1.37 to $26.10, Research, Estimates), the world's largest supplier of PC microprocessors and flash memory chips, rose 32 cents to $26.42 in extended-hours trade.

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Bryant did not provide a specific per-share earnings estimate. Analysts on average most recently had been expecting the company to turn a profit of 10 cents per share on roughly $6.4 billion in revenue, according to a survey conducted by First Call, a research firm that tracks corporate earnings.

Some analysts had been expecting Intel to provide a less optimistic outlook. Merrill Lynch on Thursday cut its revenue forecast for Intel to $6.3 billion from $6.5 billion, saying sluggish back-to-school sales and continued pricing pressure is likely to intensify in the latter part of the quarter.

Lehman Brothers made a similar call earlier this week.

Both analysts cited increased price competition as the reason for their cautious comments.

While it still garners roughly 80 percent of the market, Intel has been aggressively pricing its newest Pentium 4 processors in an effort to thwart the advances of Advanced Micro Devices, whose Athlon and Duron brand processors have been grabbing Intel's market share.

Last week, introduced a Pentium 4 processor that operates at 2 gigahertz, or two billion cycles per second. It priced the new chips at $562 each in 1,000-unit quantities.

To put the magnitude of Intel's Pentium 4 price cuts into perspective, consider that when Intel introduced the Pentium 4 less than a year ago, the 1.5 GHz version was priced at $819. AMD has responded in kind. The company last week cut the price of its fastest Athlon processor, which operates at 1.4 GHz, to $130 from $253.

During the teleconference, Bryant said the less optimistic gross margin outlook was due mostly to higher-than-expected manufacturing costs. Intel entered the quarter with plans to accelerate the production of the Pentium 4 chips while driving down manufacturing costs.

"As we set those plans in place, we knew there was a pricing element, and we went to the factories and said, 'We need you to reduce expenses by hundreds of millions of dollars.' They got about 80 percent of what I asked for," Bryant said.

Bryant said Intel's microprocessor business continues to follow seasonal patterns, with units shipments rising. Shipments of microprocessors are typically are stronger in the second half of the year because of the back-to-school and holiday seasons.

However, because of the price cuts, microprocessor revenue growth has been muted, Bryant said.

At the same time, he said the company's flash and communications chip businesses remain also are performing at about the same levels that they did during the second quarter. graphic

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