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Intel stands by estimates
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June 7, 2001: 6:48 p.m. ET
Chipmaker says its results will come in on low end of targeted range
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NEW YORK (CNNfn) - A top executive of Intel Corp. said Thursday the company's second-quarter financial results will fall within its previous estimated range, noting that the numbers will likely be on the low end of its targets.
He also said the company's core microprocessor business appears to be stabilizing and is tracking within expectations, while sales of flash memory chips also are on track. At the same time, he said sales of chips for networking and communications products remain sluggish.
"The quarter is proceeding essentially as expected," Andy Bryant, Intel's chief financial officer, told analysts during a teleconference Thursday evening.
"The microprocessor and flash businesses are on track, while the networking silicon market is slower than we anticipated," Bryant added.
When Intel reported its first-quarter results in April, Bryant had told analysts to expect second-quarter sales to range between $6.2 billion and $6.8 billion. He did not provide a specific per-share earnings estimate but said he expected the company's gross margin will slip in the second quarter to about 49 percent, plus or minus a couple of points, from 51.7 percent in the first quarter.
Analysts polled by earnings tracker First Call most recently had expected the company's second-quarter revenue to come in at roughly $6.3 billion. The consensus earnings estimate currently stands at 11 cents per share.
Bryant said he expects Intel's second-quarter revenue, gross margin, and expenses to be on the low end of the ranges the provided in April. He said all the company's other previously stated expectations remain unchanged, with the exception of amortization of goodwill and other acquisition related intangibles and costs, which is expected to be higher due to the impact of acquisitions that have closed within the current quarter.
Intel is the largest supplier of PC microprocessors, garnering more than 80 percent of the global market share. The company also makes flash memory and embedded chips for communications and industrial equipment.
Many analysts had been expecting the Santa Clara, Calif.-based company, considered by many to be a bellwether for both the semiconductor and PC industries, to provide a less optimistic sales forecast as it deals with continued weakness in the global PC market. Earlier this week, Merrill Lynch's Joe Osha said he's expecting Intel's revenue in the first quarter to come in below the low end of the company's forecasted range.
Some of the more bullish chip industry analysts interpreted Bryant's comments as a signal that a recovery may soon be at hand.
"We totally and one hundred percent sign off on 'the semiconductor sector is recovering' theory," said Salomon Smith Barney analyst Jonathan Joseph. "There were a lot of analysts saying they were going to reduce the range. Midpoint is a victory."
Goldman Sachs analyst Terry Ragsdale, who had been anticipating bad news, characterized the update as "benign."
"This gives some relief to the worriers," he said.
Shares of Intel (INTC: Research, Estimates) rose $1.32 to $31.14 on Nasdaq ahead of the news, which was released after the closing bell. They rose another $1.67 to $32.81 in extended hours trade.
Intel's core microprocessor business has been hurt by a sharp drop in demand for PCs, especially in the United States, which resulted in a glut of inventory in the electronics supply chain.
However, Bryant said Intel has seen signs that the market is stabilizing and expects a stronger second half of the year. The second half historically has been the chip industry's best, as sales typically increase during the back-to-school and holiday shopping seasons.
"I think for most of our customers, there were reductions in the first quarter, and we assume they've been pretty much maintaining normal levels of inventory now," he said. "I don't think there was a lot of excess inventory in the channel when the quarter began, and to our knowledge, there's not a lot of excess buildup now."
However, he said that's not necessarily the case in the networking and communications segment.
"At this point, we're not calling a bottom in the communications silicon business," Bryant said. "I don't know when that happens. It's just too murky to know."
Earlier this week, a top executive of Advanced Micro Devices, Intel's top rival in the PC processor market, made similarly bullish remarks about the latter half of the year.
In addition to the overall weakness in the PC market, Intel and AMD also have been engaged in a pricing war. Analysts have pointed out that Intel has aggressively slashed prices on its Pentium 4 processors in an effort to hold on to its market share, which AMD has steadily been snatching away.
Although he could not provide specifics and would not comment specifically on pricing moves, saying only that average selling prices had dropped as the company expected, Bryant said he thinks the company so far has been holding on to its existing market share.
"We said that our goal in the quarter would be to maintain, and if possible, to gain some market share," Bryant said. "It's hard to know the answer to that because we don't see AMD's numbers throughout the quarter.
"We're certainly not losing any, and with a little luck, we'll gain a little bit back that we lost in the first quarter," he added. 
-- Reuters contributed to this report.
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