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Intel 2Q falls short
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July 13, 1999: 6:45 p.m. ET
Slowdown in chip shipments, lower selling prices, hurt bottom line
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NEW YORK (CNNfn) - Hurt by a slowdown in microprocessor shipments and intense pricing pressures in the low-cost PC market, Intel Corp. Tuesday reported second-quarter earnings that fell short of Wall Street estimates. But the world's largest chipmaker issued a positive outlook for the second half of the year.
The Santa Clara, Calif., company recorded a profit of $1.7 billion, or 51 cents a share. Analysts polled by First Call expected Intel (INTC) to report a profit of 53 cents a share for the quarter. Revenue increased 14 percent to $6.7 billion.
Intel, which is widely regarded as a bellwether for the PC industry, earned $1.2 billion, or 33 cents a share, on $5.9 billion in revenue in the year-ago period.
Intel said microprocessor shipments fell from first-quarter levels. The company also noted that average selling prices of its chips dropped as Intel moved aggressively in the low-cost PC market. Gross margins remained flat from first-quarter results at 59 percent.
"As expected, second quarter revenue reflected a seasonal slowdown," said Craig Barrett, Intel president and chief executive officer.
Nonetheless, Intel said it expects third-quarter revenue and gross margins to be up slightly from the second quarter figures.
But Dan Niles, technology analyst at BancBoston Robertson Stephens, told CNNfn analysts will likely have to cut their third-quarter estimates.
"It looks like they're estimating [third-quarter earnings per share] around 55 cents," Niles said. "That's lower than the 58 cents analysts are carrying."
Intel shares have been on a roller coaster ride this year
Intel shares slipped 1/16 to close at 65-3/8 on the Nasdaq stock market prior to the earnings announcement. In after-hours trading, the stock traded as low as 62-5/8 before rebounding to 65-1/8.
However, Niles said Intel's stock could come under pressure when trading Nasdaq trading resumes Wednesday.
"Ultimately, we buy these stocks for earnings," he said. "When everyone cuts their numbers tomorrow morning, it may be difficult for the stock to stay up."
Intel executives outlined the effects two recent mergers are likely to have on its earnings performance.
During the quarter, Intel acquired Level One Communications (LEVL), which makes chips for networking applications, and telecommunications software provider Dialogic Corp. (DLGC).
Andy Bryant, Intel chief financial officer, estimated that the Level One acquisition would have an "ongoing impact" of about 3 cents a share while the Dialogic deal would affect Intel's shares by about a penny per quarter.
For the first half of fiscal 1999, Intel posted a profit of $3.7 billion, or $1.08 a share, on $13.8 billion in revenue, compared with first-half 1998 earnings of $2.4 billion, or 69 cents a share, on $11.9 billion in revenue.
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Intel
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