By John Rogers
Intel Corp’s first-quarter results edged out analysts’ expectations as the chip giant posted net income of $2.0bn, or $0.57 after Monday’s two-for-one split. Analysts surveyed by First Call had been expecting $0.55 in earnings for the quarter. Revenue for the quarter came in at $7.1bn, an 18.4% increase over the year-ago quarter but a decline of about 7% from the preceding quarter which left it below some analysts’ estimates. The company also warned that revenue for the second quarter will be flat to slightly down on first-quarter levels.
The sales issues fueled already widespread concerns over the relative health of the PC industry but, on a conference call with analysts, company executives largely ducked questions on the issue saying only that the company’s business was increasingly PC-centric and that it still had faith in demand levels going forward. Analysts were also assured that the current state of affairs at Compaq Computer Corp – which last week previewed a serious shortfall in first-quarter earnings – had been factored into its projections for next quarter and the full year. Compaq accounted for 13% of Intel’s total revenue last year.
The company said strong sales of the new Pentium III and Pentium III Xeon processors and faster versions of the low-end Celeron chip helped the better-than-expected bottom line for the quarter, as gross margin increased to 59% of sales from 58.2% in the fourth quarter. Another boost was the fact that overall spending for the quarter declined about 3% sequentially.
Intel asserted that it was pleased with initial shipments of the Pentium III and said it was on track to become the company’s fastest-ramping chip ever. While European and American sales were down, as expected, Intel said Japan saw its first sequential growth since the second quarter of 1997. Unfulfilled demand for the Pentium II, a problem as the company exited the fourth quarter, has now been caught up with and there was essentially no such unfilled demand at the end of the first quarter.
Looking ahead, Intel said the expected second-quarter revenue level is consistent with normal seasonality. Gross margin should remain at about 59% for the quarter and is expected to be 57%, plus or minus a few points, for the full year. Expenses for the second quarter are expected to be about 6% to 10% higher than first quarter expenses of $1.6bn, due to higher spending associated with merchandising and increased R&D. R&D spending for the full year is projected at approximately $3.0bn.
