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Intel Profit Falls Less Than Expected

January 14, 1998|From Times Wire Services

Intel Corp. on Tuesday said fourth-quarter earnings fell a less-than-expected 8.9%, the second major technology company to raise investor expectations that the industry can overcome the Asian economic turmoil.

Santa Clara-based Intel said warned its first-quarter revenue would be flat with fourth-quarter revenue of $6.5 billion. It said results were weakened by slower demand for computers in South Korea and other Asian countries, offset somewhat by strength in China.

The world's largest maker of computer chips said it earned $1.74 billion, or 98 cents a share, in the three months ended Dec. 27. That was down from $1.91 billion, or $1.06 a share, a year earlier.

Meanwhile, Advanced Micro Devices Inc. reported a fourth-quarter loss that was less than expected, as its microprocessor sales to personal computer makers surged.

AMD also said it saw little impact from Asia's economic woes and was helped by rising prices for flash memory chips, one of its main products. But it was plagued for the third quarter in a row by manufacturing snafus that curtailed production of its flagship K6 microprocessor.

After the market closed, AMD said it had a loss of $12.3 million, or 9 cents a share, in the most recent quarter, compared with a loss of $21.2 million, or 15 cents, in the same period a year ago.

Wall Street had expected Sunnyvale-based AMD to report a loss of 14 cents a share for the period ended Dec. 28, according to a recent analyst survey by First Call, which tracks earnings forecasts. AMD shares rose $3.13 to close at $20.88 on the New York Stock Exchange.

Intel said it expects sales for the first quarter to be little changed from the fourth quarter's. First-quarter gross margin, or the percentage of sales left after product costs are subtracted, is expected to be "down a few points" from the 59% in the fourth quarter, Intel said.

Intel said it expects to spend about $5.3 billion on new semiconductor plants and other capital spending this year, up from $4.5 billion in 1997.

Motorola Inc.'s fourth-quarter profit increase announced Monday and forecast of 10% sales growth in the first half, coupled with Intel's decision to boost its capital spending this year, is starting to reassure investors that profits won't plunge, even with the crisis in Asia, where tumbling currencies and higher interest rates have slowed economic growth. About a quarter of the world's PC sales come from Asia.

"This is just a clear expression of their long-term confidence," said Duane Eatherly, a technology analyst at Banc One Investment Advisors, which owns shares of Motorola and Intel.

In a related development Tuesday, the Federal Trade Commission declined to block Intel from buying a leading computer graphics-chip maker but said its investigation of the $420-million deal will continue.

The FTC said it decided against seeking a preliminary injunction to block the purchase of Chips & Technologies Inc. of San Jose, which makes the graphics controllers that enable computers to display images.

Intel shares rose as high as $79 in trading after the close of regular U.S. trading. Intel rose $1.31 to close at $76.94 in Nasdaq trading.

Intel was expected to earn 90 cents a diluted share, the average estimate of 32 analysts surveyed by First Call Corp.

U.S. companies now report earnings per share two ways: diluted, which reflects options, warrants and other securities convertible into common stock, and basic, which doesn't reflect them. Intel's basic earnings per share fell to $1.07 from $1.16.

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