Fri, Mar 07, 2003 - Page 11 News List

Intel to narrow sales forecast

WELCOME NEWS The move comes on the back of increased demand for personal computers in the Asia region, quelling fears that orders would fall after Christmas

BLOOMBERG , SANTA CLARA, CALIFORNIA

Intel Corp, the world's biggest computer chipmaker, will probably narrow its revenue forecast during an update on first-quarter results later today as orders stabilize, investors said.

Intel in January predicted US$6.5 billion to US$7 billion in sales and may trim the bottom off that range, shareholders and analysts said. Lehman Brothers analyst Dan Niles said the company will call for US$6.7 billion to US$7 billion, and Merrill Lynch & Co's Joe Osha expects revenue of US$6.82 billion.

Personal-computer demand in Asia has improved, and the chipmaker is winning a higher percentage of its sales from more expensive processors for laptops and server computers that run Web sites, investors said. Dell Computer Corp has said sales this quarter will increase, another sign demand has stabilized.

"The market certainly didn't fall off a cliff after Christmas," said Jane Snorek, who helps manage US$38 billion at US Bancorp Piper Jaffray, which owns Intel shares.

Analysts expect Santa Clara, California-based Intel to have a first-quarter profit before some costs of US$0.12 a share on sales of US$6.75 billion, the average estimate in a Thomson First Call survey. Net income was US$0.14, with sales at US$6.78 billion, in the year-earlier period.

Intel shares rose US$0.36 to US$16.98 on the Nasdaq Stock Market yesterday. They dropped 50 percent last year, compared with a 45 percent slide in the Philadelphia Semiconductor Index.

Dell, the world's second-largest PC maker, in February said fourth-quarter sales rose 21 percent and revenue this period would increase more than analysts predicted. Smaller PC makers, such as "white box" companies that sell unbranded machines, are also showing improvement, Snorek said.

PC sales started slipping in the second half of 2000 and fell 4.2 percent in 2001, the first decline since 1985, according to market researcher IDC. Sales rose 1.5 percent last year.

A narrower forecast range at Intel "gives people a sense things are tracking better than they assumed," said Joe Basset, who helps manage US$40 billion at Banc One Investment Advisors, which holds Intel shares.

Rising sales at companies that make power cords and PC parts indicate that demand is higher than most analysts predicted seven weeks ago, said Karl Kroeker, who helps manage about US$230 billion at Banc of America Capital Management, which owns Intel shares.

Notebook sales have beaten analyst expectations, and desktop orders are in line with estimates, he said.

Intel is due to start selling its Centrino chip package for laptops on Wednesday. Centrino, which includes a processor that extends a system's battery life and chips that connect to wireless networks, will probably account for 200,000 of the 5.7 million mobile chips that Intel will sell this quarter, Kroeker said.

A higher proportion of sales from laptops and servers may boost Intel's gross margin, the percentage of sales left after subtracting manufacturing costs. Intel predicted a margin of 50 percent "plus or minus a couple points" this quarter.

The company may be reluctant to boost that estimate now, investors said. Clients are objecting to Intel's plans to increase by as much as 40 percent the price for flash memory used in cell phones, Basset said. The possibility the US will go to war also is hurting orders, he said.

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