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.
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.
Intel isn't out of trouble yet, analysts say.
The chipmaker is cutting prices on its flagship 4 processor to speed its adoption and compete with rival Advanced Micro. Advanced Micro won 21 percent of the market during the quarter, up from 17 percent in the December period -- while Intel fell for the third consecutive quarter to 77 percent from 82 percent, according to preliminary data from Mercury Research.
At the same time, Intel's non-PC business is still suffering.
The communications market faces more difficulties because manufacturers still have extra inventory and they didn't recognize the problem as quickly, Intel's Bryant said. It's too soon to tell when a recovery might come in that area, he said.
Communications clients have extra flash memory, which stores data when devices are turned off. The drop in sales of chips for servers computers that run Web sites was more severe than the decline in desktop-PC chips, executives said.
``If you're focused on networking and communication, from the chip side you're in a world of pain for the next year,'' said Thomas Weisel Partners analyst Eric Ross.
Intel will update its targets in a mid-quarter conference call June 7.
TYPHOON: The storm’s path indicates a high possibility of Krathon making landfall in Pingtung County, depending on when the storm turns north, the CWA said Typhoon Krathon is strengthening and is more likely to make landfall in Taiwan, the Central Weather Administration (CWA) said in a forecast released yesterday afternoon. As of 2pm yesterday, the CWA’s updated sea warning for Krathon showed that the storm was about 430km southeast of Oluanpi (鵝鑾鼻), Taiwan’s southernmost point. It was moving in west-northwest at 9kph, with maximum sustained winds of 119kph and gusts of up to 155kph, CWA data showed. Krathon is expected to move further west before turning north tomorrow, CWA forecaster Wu Wan-hua (伍婉華) said. The CWA’s latest forecast and other countries’ projections of the storm’s path indicate a higher
SLOW-MOVING STORM: The typhoon has started moving north, but at a very slow pace, adding uncertainty to the extent of its impact on the nation Work and classes have been canceled across the nation today because of Typhoon Krathon, with residents in the south advised to brace for winds that could reach force 17 on the Beaufort scale as the Central Weather Administration (CWA) forecast that the storm would make landfall there. Force 17 wind with speeds of 56.1 to 61.2 meters per second, the highest number on the Beaufort scale, rarely occur and could cause serious damage. Krathon could be the second typhoon to land in southwestern Taiwan, following typhoon Elsie in 1996, CWA records showed. As of 8pm yesterday, the typhoon’s center was 180km
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STILL DANGEROUS: The typhoon was expected to weaken, but it would still maintain its structure, with high winds and heavy rain, the weather agency said One person had died amid heavy winds and rain brought by Typhoon Krathon, while 70 were injured and two people were unaccounted for, the Central Emergency Operation Center said yesterday, while work and classes have been canceled nationwide today for the second day. The Hualien County Fire Department said that a man in his 70s had fallen to his death at about 11am on Tuesday while trimming a tree at his home in Shoufeng Township (壽豐). Meanwhile, the Yunlin County Fire Department received a report of a person falling into the sea at about 1pm on Tuesday, but had to suspend search-and-rescue
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