Home / World Business
Sat, Dec 04, 2004 - Page 12 News List

Intel raises outlook after unexpected demand rally

STRONG FINISH The chip giant significantly increased its revenue forecast for the fourth quarter, citing stronger than expected demand in all its major market segments


Eking out a strong finish to end a disappointing year, Intel Corp on Thursday raised its revenue forecast for the fourth quarter, citing surprisingly strong demand across its line of chips for personal computers.

The company said its revenue for the fourth quarter will be between US$9.3 billion and US$9.5 billion, far higher than the range of US$8.6 billion to US$9.2 billion the company predicted in October.

The bright outlook, announced after markets closed, caused shares of Intel to jump more than 8 percent to US$24.55 in after-hours trading. In regular trading, the company's shares declined US$0.39 to close at US$22.71.

For Wall Street, the news was some relief after a string of product delays, inventory problems and project cancellations in recent months. Intel shares have lost nearly 30 percent of their value this year, though the stock price has improved during the past two months as investors anticipated stronger holiday sales.

Andy Bryant, Intel's finance chief, said the company experienced stronger than expected demand "in all major market segments and geographies" during the quarter. Bryant said the revised revenue forecasts will amount to an 8 percent increase over the fourth quarter last year. The midpoint of the revised forecast would represent an 11 percent increase over revenues in the third quarter.

"This revenue guidance would yield a record quarter and a record year," Bryant said.

He added that most of the growth is in the Intel Architecture business, which supplies microprocessors for computers. Bryant did not provide analysts with details of Intel's flash memory business, which supplies chips used in cell phones; that business was particularly weak in the last quarter.

"It was broadly encouraging," said Tim Luke, an analyst with Lehman Bros. "There was some concern margins would suffer even further." Instead, he said, Intel appears to have made considerable progress toward reducing excess inventory, a problem the company revealed several months ago and which dragged down earnings in the previous quarter.

Bryant said the company now expects inventory levels to drop in the fourth quarter, which ends on Dec. 25.

"Our inventory levels are on track to decline this quarter by several hundred million dollars," Bryant told analysts.

He also said the company's factory utilization rates appeared to be "bottoming out" this quarter.

Intel said it expects gross margins for the quarter to be in the upper half of the range between 55 percent and 57 percent, only a slight improvement on the previous forecast of 56 percent. At the end of the third quarter, the company blamed lower margins in part on weaker demand for its more profitable chips for higher priced PCs and server computers, which was offset by stronger sales of cheaper, less profitable chips.

This story has been viewed 3313 times.

Comments will be moderated. Remarks containing abusive and obscene language, personal attacks of any kind or promotion will be removed and the user banned.

TOP top