Intel Corp, the biggest semiconductor maker, said third-quarter net income fell as sales of the thumbnail-sized chips that power personal computers and communications gear sank.
Net income declined 96 percent to US$106 million, or US$0.02 a share, from US$2.51 billion, or US$0.36, a year earlier, when the company had a US$966 million gain from investments and other income.
Sales fell 25 percent to a better-than-expected US$6.55 billion, sending the shares up as much as 2.9 percent after the report.
PC chip sales came in stronger than expected, and demand for communications chips continued to lag. Chief Financial Officer Andy Bryant, who since January has been predicting a stronger second half, said a recovery is "unlikely."
Investors said they were encouraged by Intel's forecast for fourth-quarter sales of US$6.2 billion to US$6.8 billion, meeting the low end of analysts' targets.
"In this environment, we'll live with it," said Sunil Reddy, a fund manager with Fifth Third Bancorp, which owns 8 million Intel shares. "I don't see dramatic improvement, but I see some stabilization."
The Santa Clara, California-based chipmaker's net income includes acquisition-related costs. Excluding these expenses, profit would have been US$655 million, or US$0.10 a share. On that basis, which doesn't comply with generally accepted accounting principles, earnings matched the average estimate in a Thomson Financial/First Call analyst poll.
Intel shares climbed as high as US$25.67 after the earnings release. They rose US$0.58 to US$24.96 in regular US trading before the report. The stock has lost 30 percent of its value in the past year.
A seasonal pickup in demand later this year isn't likely after the terrorist attacks Sept. 11, Bryant said in an interview.
"The worldwide economic softness causes us to temper our forecast," he said. Shipments of everything from PC chips to flash memory to network processors rose in the September period from the prior quarter.
Demand for Pentium PC processors was strong during the final two weeks of last month, after slowing after the attacks, Bryant said. Sales of the flash-memory chips remained steady, and telecommunications-chip demand weakened, he said.
Analysts polled by First Call expect sales of US$6.8 billion and earnings of US$0.11 a share for the current period. In the fourth quarter of last year, the company had revenue of US$8.7 billion and net income of US$0.32.
Intel broke out sales from its communications and wireless units for the first time. The division that builds chips for PCs and servers accounted for 82 percent of sales and was the only one to make money during the period.
Revenue from that segment fell to US$5.39 billion from US$7.04 billion a year ago. Sales of wireless products including flash fell to US$509 million from US$667 million, and revenue from communications chips fell to US$580 million from US$948 million.
Intel cut its research and development spending plans for the year to US$3.9 billion from US$4 billion and reiterated that it will spend US$7.5 billion in 2001 on new manufacturing tools and plants.
The company will give a mid-quarter update on Dec. 6.
Intel has regained some of the ground it lost earlier this year to rival Advanced Micro Devices Inc.
Intel won 77.5 percent of the microprocessor market in the quarter, according to preliminary data from Mercury Research. That compares with 76.7 percent in the June period and 81.8 percent in the year-ago third quarter.
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