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Mon, Jul 05, 2004 - Page 12 News List

Intel's Q3 sales may miss estimates, analysts say


Intel Corp's third-quarter sales growth may be reduced by lower-than-expected demand for personal-computer parts and problems with its new Grantsdale chipset, said two analysts who cut their revenue forecasts.

Deutsche Bank analyst Ben Lynch cut his growth estimate and Morgan Stanley's Mark Edelstone said Intel may forecast a sales range with a midpoint of US$8.5 billion to US$8.6 billion for the quarter ending in September, below the US$8.75 billion average prediction of analysts surveyed by Thomson Financial.

"End demand could be slowing, which would be the worst-case scenario," Deutsche Bank's Lynch said in an interview. New York-based Lynch cut his rating on Intel to "hold" from "buy."

The estimate cuts indicate PC demand may be waning more rapidly than previously thought. After averaging sales growth of 21 percent for the past three quarters, Santa Clara, California-based Intel may achieve growth of as low as 9 percent, according to Edelstone's estimates. Intel said last week that some of its new Grantsdale chipset for PCs were malfunctioning, prompting concern sales of the chipset may not grow as quickly as expected.

Intel said the problem has been fixed.

Intel, the world's largest semiconductor maker, will report second-quarter earnings July 13 and give forecasts for the current period. Spokesman Robert Manetta declined to comment because of a "quiet period" ahead of the company's earnings announcement.

Edelstone said the midpoint of Intel's forecast range for third-quarter sales will probably be US$8.5 billion to US$8.6 billion, below his previous forecast of US$8.7 billion. New York-based Edelstone rates Intel "overweight/attractive." Deutsche Bank's Lynch said he expects revenue growth of 5.7 percent in the third quarter from the second, down from a previous forecast of 7.7 percent. He cut his third-quarter sales estimate to US$8.57 billion, less than the average estimate of US$8.75 billion from 24 analysts in a Thomson Financial survey.

Computer component makers in Asia "are uncertain going into the third quarter, and that could lead to conservatism on Intel's part," Lynch said in the interview.

Shipments of motherboards, the main circuit boards that hold parts in computers, will grow 16 percent in the third quarter from the second, instead of the typical 25 percent, he said.

The Grantsdale chip, which is designed to improve graphics and sound on computers, may power about 20 percent to 30 percent of PCs sold by the end of the year, lower than Intel's estimate of 50 percent, said Hans Mosesmann, an analyst at Schwab Soundview.

"We believe that Grantsdale will ramp at a slower clip than current expectations," Mosesmann said.

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