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Dell, Qualcomm Expect to Meet Profit Estimates

Earnings: Maxtor, the No. 1 computer disk drive maker, warns of wider-than-anticipated loss on price reductions and less demand.

June 22, 2002|From Times Wire Services

Two technology titans, PC maker Dell Computer and cell phone giant Qualcomm Inc., said Friday that they expected to meet or beat earnings projections in the current quarter.

But Maxtor Corp., the world's biggest computer disk drive maker, said it expected a wider-than-forecast second-quarter loss and lowered its sales estimate, blaming price cuts and less demand

Dell spokesman Mike Maher said the No. 2 PC maker, which is based in Round Rock, Texas, was "on course and we have not changed our guidance."

Dell said in May that it would have $8.2 billion in revenue and 18 cents earnings per share in its fiscal second quarter ending in July.

On Friday, Chief Executive Michael Dell was quoted as saying that his company had not seen the soft computer demand noted by other companies in the industry, such as Apple Computer Inc. and microprocessor makers.

Shares in Dell closed up 5 cents at $23.98 on Nasdaq.

San Diego-based Qualcomm said it expected earnings in its fiscal third quarter to meet or exceed the high end of its previous forecast, boosted by strong demand for its advanced wireless technology that lets cell phone users surf the Web, swap pictures and download music.

Qualcomm had said it expected earnings for the quarter ending June 30 of 21 cents to 23 cents a share, excluding its strategic investment unit and special charges.

Wall Street analysts, on average, had expected 22 cents a share, according to Thomson First Call. The company posted earnings of 23 cents in the year-earlier third quarter.

Investors have expressed skepticism that Qualcomm will meet forecasts after this quarter, in part because they say not enough U.S. consumers will want new phones. Qualcomm may be benefiting from a push by mobile phone carriers Sprint PCS and Verizon Wireless Inc. to sell flashier handsets with color screens and faster Web access.

Qualcomm shares closed off 21 cents at $26.12 on Nasdaq in a weak market on turnover of almost 29 million shares.

Maxtor said its loss would be as much as $90 million, or 38 cents a share, excluding some costs, on sales of $880 million to $910 million. The shortfall doesn't include goodwill amortization from the $340.1-million purchase of Quantum Corp.'s hard-drive business last year.

Some hard-drive makers are cutting prices and buying rivals because sales of their data storage devices have slumped. Computer makers, including Maxtor customers Dell, Apple and Gateway Inc., don't expect sales to rise for the rest of 2002. Hitachi Ltd. said June 4 that it would buy IBM Corp.'s hard-drive business for $2.05 billion.

"The magnitude was a surprise," said Hoefer & Arnett analyst Mark Miller, who owns Maxtor shares and cut his rating to "hold" from "buy." Customers such as Hewlett-Packard Co., EMC Corp. and Dell are demanding price breaks from suppliers such as Maxtor amid declining sales, Miller said.

Maxtor was expected to have a loss of 24 cents a share on sales of $982.7 million, the average forecast of analysts surveyed by Thomson First Call.

Maxtor's profit estimate doesn't agree with generally accepted accounting principals.

The firm had a loss of $319.8 million, or $1.35 a share, on sales of $1.04 billion in the year-earlier period.

Shares of Milpitas, Calif.-based Maxtor rose 2 cents to $4.45 on the New York Stock Exchange. They've declined 30% this year.

The company expects to ship 12.5 million to 12.7 million hard drives this quarter, a gain over the year-earlier period though a decline from the first quarter. The second quarter is usually the company's slowest for sales.

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Reuters, Bloomberg News and Associated Press were used in compiling this report.

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