Intel Corp, the biggest computer-chip maker, said Tuesday first-quarter net income dropped 82 percent because slack demand and slowing economic growth worldwide hurt sales.
The company's shares jumped as much as 12 percent as revenue beat Intel's reduced estimates. Net income fell to US$485 million, or US$0.07 a share, from US$2.7 billion, or a split-adjusted US$0.39, a year earlier. Sales dropped 16 percent to US$6.68 billion.
Intel last month delivered a bleak forecast as demand for the thumbnail-sized chips that power personal computers, cellphones and networking gear tumbled. Tuesday, the company said second-quarter sales will be US$6.2 billion to US$6.8 billion, more than some analysts expected, and indicated that business from computer makers started to pick up in March, though other markets still look challenging.
``It's the prelude to a turnaround,'' said Graham Tanaka, president of Tanaka Capital Management, which owns Intel shares.
``People had pretty much written off first and second quarter anyway. What people are looking for is direction -- for Intel to say microprocessors appear to have stabilized, that's really important.'' Intel shares rose as high as US$29.07 Tuesday after the earnings release. They slipped US$0.26 to US$26.04 in regular trading before the report. They've lost 66 percent of their value since touching a record US$75.81 in August.
Santa Clara, California-based Intel's net income includes investment gains and acquisition-related costs. Excluding the costs, profit would have been US$1.1 billion, or US$0.16 a share, in the recent period. On that basis, the company was forecast to earn US$0.15, the average estimate in a First Call/Thomson Financial survey.
* Intel has announced plans to cut 5,000 jobs, mostly through attrition, and reduce discretionary spending.
* After Dell Computer left its targets intact earlier this month, investors began hoping for other positive data.
* As Dell, Compaq and IBM use up their stock of Intel processors, investors are betting that chip orders will rise.
In the second quarter of 2000, the company had net income of US$3.14 billion, or US$0.45 a share, on sales of US$8.3 billion.
Intel saw some positive signs in March, with PC makers asking for chips right away, Chief Financial Officer Andy Bryant said in an interview. He expects growth in the PC market to resume at a normal pattern in third and fourth quarters.
``We saw some signs we're at the equilibrium point,'' Bryant said. "In Q1, we saw it change from a situation where no one wanted product to a situation where people wanted product for immediate shipment."
The past six months have been tough for PC makers. Sales in the crucial holiday season didn't materialize, and continuing worries about the economy prompted businesses and consumers to delay spending on PCs and software into this year.
Hewlett-Packard Co, Compaq Computer Corp and others have reduced their expectations and said it's hard to predict when demand could rebound. Intel has announced plans to cut 5,000 jobs, mostly through attrition, and reduce discretionary spending.
After Dell Computer Corp left its targets intact earlier this month, investors began hoping for other positive data. Now, they may have found it.
``The key thing is that there are not an excess amount of Intel processors sitting at Dell and Compaq and IBM, so as soon as their business picks up, then Intel's picks up as well,'' said Todd Ahlsten, research director at Parnassus Investments, which owns about 800,000 Intel shares.
The report boosted other PC-related companies in trading after US markets closed. Dell rose US$1.60 to US$27.90, while Intel rival Advanced Micro Devices Inc gained US$2 to US$25 and chip-equipment maker Applied Materials Inc added US$2.91 to US$50.50.
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