Intel Corp may narrow its second-quarter sales forecast to the low end of an earlier range in a midquarter business update today, amid a stalled recovery in demand for personal-computer chips.
The world's biggest semiconductor maker in April said sales would rise to US$6.4 billion to US$7 billion this period. Analysts expect revenue of US$6.68 billion and profit of US$0.15 a share, the average estimates in a Thomson First Call survey. Intel earned US$0.12 before some costs on sales of US$6.33 billion a year earlier.
Corporate spending on computers and related products still hasn't rebounded from a slump that's lasted more than a year, and giveaways of printers and digital cameras that wooed consumers into buying PCs in the past two quarters have ended. The second quarter is typically the weakest for PC sales, and investors said demand may have eroded since the company made its earlier forecast.
"We're coming out of the recession, but it's really slow," said Jerry Dodson, president of Parnassus Investments, which owns Intel shares and manages US$600 million. "Demand for technology is really low in the summer."
Revenue from Xeon server-computer chips that power Web sites and e-mail is rising, and sales of flash memory, which stores data in devices such as cell phones and handheld computers, are improving, analysts said. At the same time, demand for Pentium 4 PC processors is slowing, and sales in the company's unit that makes computer-networking chips are falling because of a collapse in the telecommunications-equipment market, they said.
Intel shares have fallen 14 percent in the past three months, compared with a 24 percent drop in the Philadelphia Semiconductor Index and a 30 percent decline for rival Advanced Micro Devices Inc.
Santa Clara, California-based Intel usually gets more than 30 percent of its second-quarter sales in June and may need to win even more this time around, Lehman Brothers Inc analyst Dan Niles wrote in a note to clients last week. That makes it tougher for Intel to know how the quarter will shape up, he said.
"April was actually fairly decent, but May did not improve as much as expected relative to April, calling into question the ramp expected for June," Niles wrote.
PC sales in US stores sank 36 percent in April from March.
That's more than the normal decline of 25 percent to 30 percent in each of the past four years, according to Salomon Smith Barney.
The Semiconductor Industry Association has lowered its target for 2002 industry sales growth to 3.1 percent, from the 6 percent SIA predicted in November.
Niles expects Intel to trim its forecast to US$6.5 billion to US$6.8 billion, and Banc of America Securities' Doug Lee predicts US$6.4 billion to US$6.8 billion.
Analysts for months have been predicting a recovery in business spending in the second half. Shareholders said they're looking for clues about whether that's going to materialize.
"What's really important is the third and fourth quarters," said Graham Tanaka, whose Tanaka Capital Management owns Intel shares and manages US$160 million. "By then we should be seeing some semblance of recovery in the corporate space."
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