By John Rogers
Intel Corp surprised even optimistic followers on Wall Street with fourth-quarter results that reflected demand well beyond the company’s own expectations. The chip maker posted net income that rose 18.4% year-over-year – and 32% from the preceding quarter – to $2.06bn, or $1.19 per share, when analysts surveyed by First Call were looking for just $1.07. The results beat even the high- end estimates of $1.15. Revenues for the quarter rose 17.0% to $7.61bn, up from $6.51bn in the year-ago period. Revenues came in 13% higher than the third quarter, even after the company’s own revised guidance in November had called for an 8% to 10% sequential rise. Chief financial officer Andy Bryant noted that the stronger-than-anticipated demand allowed the company to set new records for both the top and bottom line, as well as for overall chip shipments. Even as Celeron sales failed to meet expectations for the quarter, Intel said Pentium II demand more than made up for it, and production was shifted accordingly during the quarter – a driving factor behind the surprising bottom line. There was even some unfulfilled demand for Pentium IIs at the close of the period, according to Bryant. Chipset shipments hit a new record during the quarter and motherboard unit shipments reached an eight-quarter high. Networking products also saw strong sales. Gross margins were a healthy 58% for the quarter, up from 53% in the prior quarter, as result of a good product mix and cost reductions. Overall spending was up 16% from the third quarter at $1.6bn, though, as there was a seasonal uptake of the company’s Intel Inside program for OEM partners. Even with the fourth-quarter rally, Intel’s results for the full year showed the effects of a beleaguered semiconductor industry and continued declines in average selling prices. Net income for the 12-month period fell 12.6% to $6.07bn on revenue up 4.8% at $26.27bn. Earnings per share fell 10.9% to $3.45 and gross margins slipped three points to 54%. Full-year results also include a pre-tax acquisition charge of $165m. Looking ahead to the current quarter, Bryant warned that revenue and gross margins would be down from the fourth quarter, as the company hits a seasonal slump, although he offered no more specific guidance. Gross margins for the full year are expected to be 57%, plus or minus a few points, with ASPs falling further as the company begins to compete more aggressively on the low end. The company admits to have taken its eye off the ball in 98 in that area, as evidenced by the somewhat disappointing fourth-quarter Celeron sales, but feels it now has the products in place to regain the lead. Even as selling prices decline, though, cost reductions throughout the year – some of which will be realized by a shift away from slot packaging – should help to offset the damage. Stronger sales of higher-priced Xeons and the introduction of the Pentium III will also help boost the bottom line. The Y2K issue, and its effect on corporate buying, remains a wild card in evaluating Intel’s first-half performance.
