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News > Technology
Eyes on Intel
September 6, 2001: 6:17 a.m. ET

Wall St. awaits mid-quarter financial update, due after closing bell
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NEW YORK (CNNfn) - Intel Corp. will give Wall Street a glimpse at how the computer industry has been shaping up when it provides a mid-quarter financial update after the close of trading Thursday.

As the world's largest supplier of PC microprocessors and flash memory chips, the Santa Clara, Calif.-based firm is considered a bellwether of the semiconductor and PC industries, each of which has been under continued pressure on Wall Street amid flagging demand and sinking profits.

When Intel (INTC: Research, Estimates) reported its second-quarter results on July 17, executives lowered their financial targets, telling analysts to expect the company's third-quarter revenue to range between $6.2 billion and $6.8 billion.

At the same time, they said Intel's gross margin, the percentage of sales remaining after subtracting product costs, would be 47 percent, plus or minus a couple of points. They did not provide a specific earnings per share estimate.

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Intel executives attributed the shortfall in large part to the company's plans to accelerate production and aggressively price its high-end Pentium 4 processors. The company in recent quarters has been waging a price war against Advanced Micro Devices (AMD: Research, Estimates), which runs a distant second to Intel.

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 and Duron brand processors have been steadily pecking away at Intel's market share.

Last week, Intel rolled out a Pentium 4 processor that operates at 2 gigahertz, or two billion cycles per second. It priced the new chips at $562 each in 1,000-unit quantities.

To put the magnitude of Intel's Pentium 4 price cuts into perspective, consider that when Intel introduced the Pentium 4 less than a year ago, the 1.5 GHz version was priced at $819. AMD has responded in kind. The company last week cut the price of its fastest Athlon processor, which operates at 1.4 GHz, to $130 from $253.

However, the pricing war has hit AMD's bottom line much harder than its larger, deep-pocketed rival. When AMD reported its second-quarter results, executives said the company is likely to record a loss in its third quarter, where the Street recently had been expecting a profit of about 8 cents per share.

As for Intel, analysts on average currently are expecting the company to turn a profit of 10 cents per share on roughly $6.4 billion in revenue during the third quarter, according to a survey conducted by First Call, a research firm that tracks corporate earnings.

Shares of Intel rose 2.3 percent to $27.47 on Nasdaq Wednesday amid a broader downturn in the technology sector. The stock has fallen more than 60 percent over the past year from a high of $68.68 last September. graphic

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