Intel Sticks to Guidance, Likes PC Prospects

Updated from 5:06 p.m. ET

After weeks of speculation about whether it would lower its revenue forecast, microprocessor maker Intel (INTC) Thursday stuck to its numbers, saying it expects second-quarter revenue to come in slightly below $6.5 billion.

On April 17, Intel had told Wall Street to expect revenue in a range of $6.2 billion to $6.8 billion. The consensus estimate among analysts polled by Thomson Financial/First Call was $6.3 billion.

In an upbeat conference call, Intel Chief Financial Officer Andy Bryant also expressed confidence in the personal computer market. Everything microprocessor-related, from orders to shipments, fell into seasonal patterns during the last two months, Bryant said.

In after-hours trading on Island, the stock was changing hands at $32.80, up from its regular-trading close of $31.14.

Intel is a bit of a lone voice in the personal computer sector right now. Most PC makers continue to say the market is weak. Just this week, PC maker Hewlett-Packard (HWP) offered cautious words about its revenue this quarter. Bryant said the gap between these companies and Intel could be due to different expectations.

Bryant also suggested that Intel could win back some of the market share it lost to smaller competitor Advanced Micro Devices (AMD) during the first quarter. According to Mercury Research in Scottsdale, Ariz., Intel lost about 4 percentage points of the PC market in the first quarter.

"Our sense is that we're certainly not losing any [market share] and with a little luck we'll gain a little bit back that we lost the first quarter," Bryant said.

Bryant's bullish comments came after weeks of talk among analysts and investors about whether Intel could reach the revenue guidance it had set. There were concerns that PC demand hadn't picked up as expected and that Intel's new Pentium 4 was too slow in gaining traction, hurting overall shipments. Some investment houses, like Merrill Lynch, suggested that Intel would say revenue would fall below $6.2 billion, while others, like Salomon Smith Barney, said it would hold to guidance or perhaps just lop of the top half of the range. (Neither firm has done underwriting for Intel.)

While Intel did basically cut off the top of its range, it definitely didn't say revenue would fall below the range. And Bryant said that Pentium 4 shipments were on track with his expectations.

The one continuing problem was the communications business, where the company said it still sees weakness. Inventories are so high that it's difficult to determine when the business might turn around. The communications sector turned down later than the microprocessor business, with an inventory build up and light demand not hitting until early in 2001. Just Wednesday night, one communications chip company, Broadcom (BRCM), warned that revenue would be lighter in the second quarter than expected.

As is customary, Intel didn't provide earnings guidance but said that gross profit margins and expenses are running within previous expectations. It added that amortization and other acquisition-related costs will be higher than anticipated because of deals that closed during the quarter. It also said it expects a stronger second half of the year than the first half. Analysts expect Intel will earn 11 cents a share this quarter, according to First Call.

>To order reprints of this article, click here: Reprints