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Intel meets; sees lower 4Q revenue
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October 16, 2001: 6:23 p.m. ET
Company posts sharply lower results on falling revenue but matches estimates.
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NEW YORK (CNNmoney) - Intel Corp. reported a sharp drop in third-quarter results Tuesday, matching Wall Street forecasts, as the world's largest supplier of computer chips continued struggling with weakening demand for PCs and increased pricing pressures.
At the same time, executives of Intel told Wall Street to expect lower revenue in the current quarter, blaming a weak economy and declines in consumer confidence.
After the close of trading, Intel (INTC: Research, Estimates) said it earned $655 million, or 10 cents per share, during the quarter ended Sept. 29. That excludes one-time charges and compares with a profit of $2.9 billion, or 41 cents per share, during the same quarter last year.
Analysts surveyed by earnings tracker First Call anticipated a third-quarter profit of 10 cents a share.
Including $609 million in acquisition-related costs, Intel posted net income of $106 million, or 2 cents per share, a 96 percent drop from the year-ago quarter.
Revenue fell more than 25 percent to $6.5 billion from $8.7 billion. Analysts generally had expected Intel's third-quarter revenue to come in nearer $6.4 billion, according to the First Call survey.
Much of the revenue decline can be attributed to aggressive pricing as the company tries to thwart the advances made in recent quarters by Advanced Micro Devices (AMD: Research, Estimates), its much smaller rival.
Although it only garners about 20 percent of the market, AMD has been pecking away at Intel's market share, prompting the deep-pocketed company to become even more aggressive in manufacturing and pricing its Pentium 4 line of processors. Intel has slashed prices on its Pentium 4 chips by as much as 80 percent in some cases.
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While each has been hurt in that fight, AMD's scars have run much deeper than Intel's. On Oct. 5, AMD warned that its third-quarter loss would range between 26 cents and 31 cents per share, more than double what the Street had been expecting.
During a teleconference with analysts Tuesday evening, Intel Chief Financial Officer Andy Bryant said microprocessor sales had risen modestly, which is the typical seasonal pattern. Shipments of microprocessors are typically are stronger in the second half of the year because of the back-to-school and holiday seasons.
Looking ahead, Bryant said he expects Intel's revenue in the fourth quarter to range between $6.2 billion and $6.8 billion, while gross margins, the percentage of sales remaining after subtracting product costs, will be "47 percent, plus or minus a couple of points," compared with 46 percent in the third quarter.
He did not provide a specific per-share earnings estimate. The most recent consensus estimate of analysts polled by First Call is for a profit of 11 cents per share on $6.9 billion in sales.
"In a normal seasonal environment, we would expect higher revenue," Bryant said. "Our expectations have been tempered by the weak economy, and declines in consumer confidence."
Bryant said fourth-quarter spending on research and development will be about $3.9 billion, $100 million less than its previous expectations, due to cuts in discretionary spending in ongoing programs.
At the same time, he said the company stand by its $7.5 billion capital spending estimate for the full year as it continues to equip its manufacturing facilities with more advanced and efficient chip-manufacturing equipment. 
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