Intel Corp’s warning last month that its first quarter revenues would fall below expectations last month sent technology stocks plunging (CI No 3,361). Yesterday, the company duly posted first quarter revenues of $6.0bn, down 7% from last year’s first quarter revenues of $6.4bn, and down 8% from its $6.5bn fourth quarter revenues. It had been forecasting a 10% decline from the fourth quarter. Admitting that the quarter was disappointing, outgoing chairman and chief executive officer Andy Grove announced that Intel would be cutting its headcount by approximately 3,000 jobs over the next six months, predominantly through attrition. The PC industry seems to have gotten ahead of itself, building more product than end-customers purchased, he said. OEM customers were the major culprit, and the weaker demand led to lower revenues in the Americas, Japan and Europe. Net income for the quarter was $1.3bn, down 36% from the same period last time, and down 27% from the fourth quarter’s $1.7bn income. The figure included a one time charge of $165m for in- process research and development associated with the acquisition of Chips & Technologies Inc. Earnings per share were down 35% to 0.72 from $1.10 in the first quarter of 1997 and down $27% from last quarter’s $0.98 – in line with analysts expectations. Shares rose in after hours trading. Looking ahead, Intel said revenues for its second quarter would remain flat or drop slightly from the first quarter figure, but said it expects to see sequential revenue growth resume during the second half of 1998. And while gross margins are currently declining, Intel said it was still expecting gross margins of 52%, plus or minus a few points, in 1998. Shipments of P6 architecture products, including Pentium II processors, accounted for over half of sales during the quarter.
