Intel narrows sales target
Chipmaker sees sales and profit coming in on the high end of its previously forecast range.
March 7, 2002: 6:35 p.m. ET
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NEW YORK (CNN/Money) - Intel Corp. Thursday narrowed its targets for sales and a key measure of profitability, telling analysts to expect both numbers to come in on the higher end of the ranges previously forecast.
The world's biggest computer chip maker said it expects revenue for the quarter ending March 30 to be between $6.6 billion and $6.9 billion.
At the same time, the company said its gross margin, the percentage of sales remaining after subtracting product costs, is expected to be "above the midpoint" of its previously stated target of "50 percent, plus or minus a couple of points."
In the prior quarter, Intel reported sales of $7 billion and a gross margin of 51.3 percent.
Intel (INTC: Research, Estimates) typically does not provide specific per-share earnings estimates, choosing instead to set expectations for gross margins.
"It's really been pretty much as if it were scripted on Jan. 15," Andy Bryant, Intel's chief financial officer, told analysts during a teleconference Thursday evening.
"The quarter and the year are progressing in line with our expectations," Bryant said.
Analysts polled by First Call generally have expected Intel to earn 14 cents per share in the first quarter on sales of about $6.8 billion.
Earlier this week, analysts at Banc of America Securities, Morgan Stanley and Merrill Lynch each said Intel was likely to guide expectations to the higher end of its revenue forecast.
Intel is the world's largest supplier of PC and server microprocessors and derives the majority of its revenue from those products. It also makes other semiconductor products, including flash memory and chips used for communications products.
Sales of PCs during the 2001 holiday season were much stronger than most market watchers had expected, which some analysts said is having a carry-over effect as PC makers and retailers rebuild their inventories.
"Our intermediate-term 'strong buy' rating for Intel stands -- first-quarter PC inventory rebuild should temper seasonal weakness," Merrill Lynch told its clients Wednesday.
The firm also said Intel stands to extend its lead in processor performance over rival Advanced Micro Devices (AMD: Research, Estimates), while its gross margins should improve as the company shifts its production over to a more efficient manufacturing process.
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 AMD, whose Athlon XP+ and Duron brand processors have been pecking away at Intel's market share.
Helping to offset the impact of the price war on Intel's profits has been its gradual shift to a 0.13-micron manufacturing process from a 0.18 micron process, which refers to the size of the circuits etched into the silicon.
Using the 0.13 process yields more chips per silicon wafer and, therefore, improves profitability. The company also is beginning to use larger, 300-mm silicon wafers, which improves manufacturing efficiency as well.
Bryant attributed the quarter's gross-margin strength in part to more efficient manufacturing. But he stressed that most of that was from improved operational efficiency and not as much from the shift in process technology.
"Essentially, I'm asking manufacturing to handle whatever growth we may have this year and hold their spending," he said.
Intel, whose spending on chipmaking equipment represents about 20 percent of the industry's total, slashed its capital spending plan for 2002 to $5.5 billion after spending $7.3 billion in 2001. 
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