|
Intel misses the 2Q mark
|
 |
July 14, 1998: 7:06 p.m. ET
Computer chip giant reports earnings of 66 cents a share; net drops 29 pct
|
NEW YORK (CNNfn) - Computer chip giant Intel Corp. missed Wall Street's consensus for the second quarter, blaming the shortfall on a slight decline in microprocessor shipments and weaker revenues in Europe.
The Santa Clara, Calif.-based company earned $1.1 billion, or 66 cents a diluted share, down from $1.6 billion, or 92 cents a dilutes share a year ago.
Those numbers came in below Wall Street's consensus estimates of 68 cents.
Intel (INTC) shares ended down 1-1/16 to 80-11/16 in composite trading on the Nasdaq. Shares fell to 79-3/8 just after the close, but gained that back in after-hours trading.
Revenues declined slightly to $5.92 billion in the latest quarter compared to $5.96 billion a year ago.
Asia remains problematic
The geographic revenue breakdown remained relatively unchanged in the second quarter. The Americas brought in 44 percent, Europe 28 percent, Asia-Pacific 20 percent and Japan 8 percent.
Officials said while signs of growth in Japan are encouraging, they don't signal a full-scale recovery.
Although overall Asia revenues were flat, Intel sold a record number of processors to China.
Intel President and Chief Executive Officer Craig Barrett said Intel is making strides to increase productivity despite the tough market conditions in the chip industry.
"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," he said.
Gross margins decline
Intel's gross margins -- the difference between what Intel charges for its chips and the cost of manufacturing them -- declined to 49 percent, from 54 percent in the first quarter. The company blamed the decline on larger than normal inventory write-downs designed to speed the transition to the Pentium II and other higher-margin processors.
Those write-downs led Intel's inventory to decline by $118 million in the quarter.
Andy Bryant, Intel's chief financial officer, blamed some of Intel's inventory problems on a shift by manufacturers and distributors to lower their inventories and improve manufacturing efficiency.
Intel said its gross margins for the third quarter are expected to climb about 2 percentage points and come in at around 52 percent for the year.
Bryant said the company exceeded its cost reduction targets.
Outlook subdued
Mona Eraiba, semiconductor analyst at Gruntal & Co. characterized the numbers as a little "light." However she blamed the disappointments on a number of factors impacting the industry and the economies of key regions.
"The outlook statement is still very subdued, so we're at a situation where the jury is still out. The company is moving aggressively to grow, which is key to Intel and the industry," she said.
She said the industry as a whole was hit hard by inventory corrections and weakness in Asia, although there are signs the second half will bring improvement.
Still, Gruntal & Co. is maintaining a 'hold' rating on the stock. Eraiba said Intel needs to show it can pull off its move to selling more higher-margin products.
Eraiba predicted Intel shares will slip on Wednesday, but the impact will be minimal.
Looking ahead to the third quarter, Intel said revenues are expected to be flat or slightly higher than the $5.9 billion in the period just ended and gross margins are expected to rise a couple of percentage points in the third quarter from the 49 percent reported in the second quarter.
Bryant said the third-quarter is tough to forecast because of its traditionally slow start.
"You're guessing whether the orders will come in September and October. We'll stick to flat or slightly up for now and hope we beat it," he said.
Intel also said it is making progress in following through with 3,000 previously-announced job cuts. However, officials now expect it will take an extra quarter to complete the process, extending the layoffs through the end of 1998.
The company reduced its total headcount by about 750 people in the second quarter. Intel previously announced it would cut about 3,000 jobs, primarily through attrition.
|
|
|
|
|
|
Intel
|
Note: Pages will open in a new browser window
External sites are not endorsed by CNNmoney
|
|
|
|
 |
|
