Intel Gains After Hours as Wall Street Applauds Outlook

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Intel

(INTC) - Get Report

shares tumbled as low as 63 1/8 in heavy after-hours trading but then rebounded to 66 1/2 following the chipmaker's second-quarter earnings report. The stock closed the regular session at 65 3/8. Citing lower shipments in its motherboard and microprocessor units, Intel said it earned 51 cents a share. That's 2 cents below the 31-analyst

First Call

estimate but ahead of the year-ago 33 cents. After-hours traders seemed to find hope in Intel's claim that stronger results will come in the second-half.

Net income totaled $1.7 billion for the quarter, up 49% over the $1.2 billion the company reported a year ago but down 13% from the $2 billion it reported in the first quarter of this year. Second-quarter revenue came in at $6.7 billion, a 14% increase over the $5.9 billion last year but a 5% decline from the $7.1 billion the company reported in the first quarter of this year.

But how strong is strong? That's what analysts wanted to know on today's conference call with company executives.

CFO Andy Bryant said sales in the second half of the year would be "strong." But there's a big difference, some analysts pointed out, between a strong half in relation to last year's extremely strong second half and one that is strong only in relation to last half's more tepid results.

Bryant's answer was less than satisfying. "I don't want to get into finer detail about what a strong second half is," he said. "We really don't see anything dramatically different in the second half than what you would expect."

He was clearer on the definition of strong demand for the company's top-line products. Unit sales of the Pentium III chip, which saw disappointing sales in the first quarter, tripled last quarter and are now expected to make it the top-selling microprocessor in the world in unit volume this quarter.

Merrill Lynch

analyst Joe Osha had predicted Intel would come in with earnings of 55 cents a share. "It was not the greatest quarter," he said. Still, he hung up after the call feeling good about the rest of the year. "The outlook for the back two quarters looks great."

On the call, Paul Otellini, head of Intel's architecture business group, said the company has seen increased sales at both the high and low ends of the chip market. Unit sales rose for its low-priced Celeron chip but not at the expense of the more profitable Pentium lines, as has been feared. Instead, Celeron has been stealing customers away from other companies, he said, without naming prime rival

Advanced Micro Devices

(AMD) - Get Report

.

Better yet, Otellini said, the company is not gaining back the share by subsidizing these chips. While Celeron-based "free" PCs have been showing, Internet service providers and other "third parties" are eating the cost of the chips. "In general, those sales are not impacting our balance sheet or profit and loss," he said. Next quarter, he said, Celeron sales should be strong as the company continues to pummel its rivals. "Celeron will grow with the market," he said, "and with our ability to win back business."

TheStreet.com

previewed Intel's report this morning.

--

Marcy Burstiner

Elsewhere in earnings news,

Motorola

(MOT)

shares slipped to 95 in after-hours trading from a regular close of 96 1/2 despite solid second-quarter earnings. The company made 44 cents a share, topping the 28-analyst estimate of 41 cents and moving way ahead of the year-ago penny.

In other postclose news (earnings estimates from First Call; earnings reported on a diluted basis unless otherwise specified):

Earnings/revenue reports and previews

Centennial Cellular

(CYCL)

reported fourth-quarter operating earnings of $1.6 million vs. the year-ago loss of $5.9 million. The company didn't provide per-share data.

Metamor Worldwide

(MMWW)

restated first-quarter earnings to reflect discontinued operations, changing the results to 16 cents a share. The company's net income remained at 30 cents a share. Metamor also said it sees its 1999 net income rising $20 million to $22 million from the year-ago $19 million.

Norfolk Southern

(NSC) - Get Report

said it sees second-quarter earnings of 18 cents to 22 cents a share, below the 10-analyst forecast of 33 cents. The company, which made 48 cents in the year-ago period, attributed the expected shortfall to pressure on revenue and higher-than-anticipated costs from the integration of

Conrail

properties.

Waste Management

(WMI)

said it sees 1999 earnings coming in around $2.65 to $2.70 a share and 2000 earnings of around $2.90 to $3 a share. The company also said it started a probe into allegations of insider trading.

In other earnings news:

Mergers, acquisitions and joint ventures

Chancellor Media

(AMFM)

and

Capstar Broadcasting

(CRB)

said their shareholders approved the companies' planned merger. Capstar shareholders will receive 0.4955 of an AMFM share for each share held.

Offerings and stock actions

Goldman Sachs

priced

Tibco Software's

(TIBX:Nasdaq) 7.3 million-share IPO top-range at $15. The company's products allow computer applications to communicate over the Internet. Tibco is majority owned by

Reuters

(RTRSY)

.

Miscellany

Learning Tree

(LTRE)

announced plans to shift the focus of its technology-based training products to Internet-based methods from CD-ROMs. The company expects to record a third-quarter charge of $6 million to cover development costs and equipment.