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Intel Corp and Advanced Micro Devices Inc have both issued profit warnings over their forthcoming first quarters. Intel waited until the market closed on Wednesday before issuing the warning, saying that revenues and net income wold fall below its expectations. Even so, technology stocks dropped during after hours trading. Intel’s shortfall is being blamed on weaker than anticipated demand, particularly in orders from PC manufacturers to be shipped within the quarter. Intel had expected revenues to remain flat with the $6.5bn fourth quarter revenues it reported in January (CI No 3,325). Intel is warning that weak demand from OEMs has led it to cut its revenue and net income expectations for the current first quarter. Revenue is now expected to come in at around $5.85bn – a 10% decline from fourth-quarter revenue of $6.5bn – after the company had predicted in January that revenue would stay flat with the fourth quarter. No net income projections were made for the quarter but, before the warning, analysts surveyed by First Call were expecting earnings of $0.93 per share which will lowered accordingly. Gross margins are now expected to be roughly 53% for the quarter, down from an earlier projection of 55%. Intel will also take a one-time charge of $165m during the quarter related to its acquisition last year of Chips & Technologies Inc, and says merger and research and development-related expenses will be up 3%. Meanwhile, Advanced Micro Devices Inc said its first quarter revenues would decline significantly, and the net loss increase significantly as compared to the fourth quarter of 1997. Revenues in the fourth quarter were approximately $613m and the net loss was approximately $12m. AMD, which signed up IBM Corp as manufacturer of its K6 Pentium II clone last month (CI No 3,358), nevertheless faces significant investment converting its own plants from 0.35 micron to 0.25 micron process, and is looking to secure external funding in the second quarter in order to continue the investment. Intel’s price cuts have also affected the company’s margins. It needs to keep the K6 priced 25% below the price of Intel chips in order to compete, it said.

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CBR Staff Writer

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