Intel Corp, the biggest chipmaker, said third-quarter sales will be within the range of its earlier forecast, a sign that personal-computer demand and chip prices aren't falling more than expected.
Revenue will be slightly below the midpoint of the range given earlier, Intel said. In July, the company said sales would be US$6.2 billion to US$6.8 billion. Analysts polled by Thomson Financial/First Call on average expected sales of US$6.41 billion.
Intel has chopped the price of its Pentium 4 PC processor by as much as 84 percent since the chip's November debut to attract customers. Some investors and analysts had predicted that Intel would trim its forecast, and the company's shares rose US$0.65 to US$26.75 after the announcement on optimism that chip sales may recover in the next few months.
"It's very good," said Rose Papp, a fund manager at L. Roy Papp & Associates, which owns Intel shares. "There is room for optimism going forward. Hopefully, September comes in reasonably well, and then they're on track to do a good fourth quarter."
Intel shares fell US$1.37 to US$26.10 in regular US trading before the report. They've lost 60 percent of their value in the past year.
Analysts expect third-quarter profit of US$0.10 a share, the average estimate in a First Call survey. In the year-ago period, Santa Clara, California-based Intel had net income of US$0.36 on sales of US$8.73 billion.
"It wasn't as bad as some people thought it might be," said Graham Tanaka, whose Tanaka Capital owns the stock. "I say that with a great sense of relief -- a lot of people were expecting more toward the lower end of the range."
The microprocessor business is showing normal seasonal growth in units shipped, Chief Financial Officer Andy Bryant said on a conference call. Flash-memory and communications sales are in line with expectations, little changed from the previous period, he said. He reiterated that the flash and networking units won't be profitable this quarter.
"This second quarter that we already passed was the bottom for them, and they expect to see a stronger second half," Doug Lee, a Banc of America Securities analyst who doesn't own the stock, told Bloomberg Television earlier today.
Gross margin, or the percentage of sales left after subtracting manufacturing costs, is expected to be within the previous forecast and below the midpoint of the range, Intel said.
The chipmaker had predicted gross margin of 47 percent for the quarter, plus or minus a couple points, and 49 percent for the year. Gross margin was 64 percent in the year-ago quarter.
Demand in Japan has softened more than expected, with the rest of the world consistent with predictions, Bryant said.
"There's still risk in here," he said. "But to tell you the truth, with the strength we saw in July and August, we're as comfortable as we can be with Q3." Investors welcomed the positive comments after recent grim forecasts from other computer and semiconductor-related companies.
Worldwide chip sales sank 37 percent in July to US$10.9 billion from US$17.3 billion a year earlier, according to the Semiconductor Industry Association. Executives from Dell Computer Corp, Hewlett-Packard Co and rival PC makers have indicated that back-to-school sales will be more muted than in past years.
Intel's expenses for the quarter will be US$2 billion to US$2.1 billion, about US$100 million less than expected. The number of workers Intel employs is falling faster than expected, Bryant said. He didn't say how many of the 5,000 job cuts planned have happened so far.
The quarter is shaping up about the same as the third quarters in the past three or four years, Bryant said. "In the face of August price cuts, I was pretty pleased to see that," he said.
He declined to comment on capital spending plans for next year.
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