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Intel Beats Estimates Despite 64% Drop in Operating Profit

Earnings: Shares rise in after-hours trading on the company's optimism about the second half of the year.

April 18, 2001|From Reuters and Bloomberg News

SAN FRANCISCO — Intel Corp. on Tuesday reported a deep drop in first-quarter earnings, but the results were slightly better than expected and the world's No. 1 chip maker offered upbeat comments about the second half, sending its shares higher.

Intel said operating profit fell 64% to $1.1 billion, or 16 cents a share, for the quarter ended March 31 from $3.04 billion, or 43 cents, in the year-earlier quarter because of weak demand and slowing economic growth.

Analysts polled by research firm First Call/Thomson Financial had estimated earnings of 15 cents a share. The sales forecast was $6.59 billion.

The company, based in Santa Clara, Calif., said sales fell 16% to $6.68 billion from $7.99 billion.

Despite a slowing U.S. economy, weakness in other parts of the globe and waning spending on information technology, Intel Chief Executive Craig Barrett said he believes its microprocessor business--80% of the company's sales--has stabilized.

And Chief Financial Officer Andy Bryant said he saw "some good signs toward the end of the quarter."

Intel shares rose to $29.05 in after-hours trading after closing down 26 cents at $26.04 on Nasdaq.

"The numbers themselves tell a pretty grim story," said Drew Peck, a semiconductor analyst at SG Cowen & Co.

"A lot is going to hinge on how much credibility there is in the comments made by Barrett that the microprocessor business has stabilized," Peck said.

In an interview with Reuters, Bryant said, "In our microprocessor business, given what we saw happening in March gives us a lot more comfort that we'll have a pretty normal second quarter and a seasonally strong second half of the year.

"The first quarter was difficult at best," he said. "In March, we saw a return to the time when customers started ordering new product again."

Since the end of last year, Intel's stock has under-performed the Standard & Poor's 500 Index by about 4% and the Philadelphia Semiconductor Index by about 15%.

At a Glance

Other technology sector earnings, excluding one-time gains or charges unless noted:

* Texas Instruments Inc., the world's No. 1 maker of computer chips for mobile phones, posted a 36% decline in profit and said it will cut 2,500 jobs, or 6% of its work force, because of weakening demand worldwide. First-quarter earnings fell to $317 million, or 18 cents a share, beating lowered forecasts of 16 cents. Revenue declined 8% to $2.53 billion, and the company said it expects second-quarter revenue to be down 20% from that figure. "Throughout the first quarter and into April, we continue to see an environment of very weak orders and order cancellations continuing across a breadth of our products. . . . It's just not clear enough for us to see at this time when this will change," said Chief Financial Officer Bill Aylesworth.

* PSINet Inc. said its fiscal fourth-quarter loss widened dramatically to $3.2 billion, or $16.83 a share, from $223.5 million, or $1.63, a year ago, and said it defaulted on $68 million in equipment leases. Revenue grew 76% to $291 million. The Internet access provider said earlier this month that it was running out of cash and probably would file for bankruptcy protection. As expected, PSINet's annual report included a warning that its financial auditors question its ability to survive or "continue as a going concern."

* RealNetworks Inc.'s first-quarter profit fell 60% to $3.5 million, or 2 cents a share, matching analyst expectations, as revenue fell 58% to $50.4 million.

* Inc. said its first-quarter loss from continuing operations narrowed to $9.1 million, or 18 cents a share, from $28.5 million, or 66 cents, a year ago, as revenue surged 165% to $5.3 million.

* Veritas Software Corp. said first-quarter operating profit grew 67% to $87 million, or 21 cents a share, on a 58% increase in revenue to $387 million, meeting expectations. But Veritas for the first time joined other software makers in lowering its outlook. The company said it expects slowing sales to result in profit of 19 cents a share for the second quarter and 84 cents for the year, compared with analyst forecasts of 21 cents and 90 cents, respectively.

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