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Intel predicts strong 1998
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April 21, 1998: 3:40 p.m. ET
Chipmaker says it is solving inventory problems, will gain in low-cost PCs
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NEW YORK (CNNfn) - Executives of Intel Corp. said Tuesday that despite continuing pricing pressures and inventory backlogs, the company expects stronger results in the second half of 1998.
Speaking to a group of financial analysts, Intel officials said the PC industry as a whole has suffered from excess channel inventory. But they added that the company is working on initiatives to address the problem and strengthen the selling channel.
"Inventory has become a life and death issue for our industry," said Sean Maloney, Intel vice president and director, sales and marketing. "The lesson of the last two quarters is that inventory has moved from being a concern of the purchasing segment to a concern of the industry itself."
Maloney said Intel is pushing such initiatives as certified training programs for channel resellers and the ability for customers to place orders online from Intel's web site.
Maloney said that although Intel expects to see more liquidation of old inventory and, as a result, more lower-priced products in the coming months, "We expect so see substantial progress by the end of the year."
Intel also said that while the average price of computers has dropped almost $300 over the past year, it has identified certain growing business segments and is primed to strengthen its position in these markets.
Many analysts have said chips from Advanced Micro Devices Inc. and Cyrix Corp. aimed at low-cost PCs contributed to Intel's lower first-quarter profits. But the company said it is optimistic about the future.
"We believe the Basic PC segment has the potential to expand our markets and bring us new users," Maloney said.
Earlier this month, Intel released its Celeron processor, which is targeted at what the company calls the "Basic PC" market, or computers priced below $1,200.
"We will spend more on development resources for the Basic PC," said Craig Barrett, Intel president and chief operating officer, who will succeed Andrew Grove as chief executive officer in May.
Barrett added that the company expects to distribute its resources more evenly among the workstation, performance, basic and mobile computing segments.
The chipmaker also said it is planning to "expand the industry" and outlined some of the new market segments in which it hopes to gain a foothold. Intel is particularly high on the visual computing market, which has long been dominated by chips from Silicon Graphics Inc.
Earlier this month, SGI said it would be incorporating chips from Intel, instead of its own, into its future workstations.
Leslie Vadasz, Intel senior vice president and director, corporate business development, pointed out that in March, Intel made an investment in Canadian visual effects company Discreet Logic Inc., whose work has been seen in such movies as "Titanic" and "Independence Day".
"Our investment [in Discreet Logic] will bring this kind of technology to the Merced chip," Vadasz said.
Merced is the code name for Intel's next-generation processor, due in the second half of 1999.
Shares of Intel rose 1-11/16 to 78-3/16 in late-day trading. 
-- by staff writer John Frederick Moore
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Intel Corp.
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