Intel projects stronger third-quarter sales
Intel projects stronger third-quarter sales
Analysts unsure of reason for improvement
By MATTHEW FORDAHL Associate Press
Saturday, August 23, 2003
San Jose, Calif. — In a sign that demand for personal computers is gaining strength, Intel Corp. unexpectedly raised its third- quarter sales forecast Friday, saying its processor business is performing much better than expected.
The semiconductor company said it now expects sales of $7.3 billion to $7.8 billion, compared with its earlier forecast of $6.9 billion to $7.5 billion. The midpoint of the new range would be an 11% improvement over last year’s third-quarter sales of $6.5 billion.
Though analysts agreed the announcement is a positive sign, they differed on whether it represents merely a stronger-than-usual back- to-school season or if it’s the start of the long-awaited upgrade cycle in which companies and consumers replace older machines with new ones.
“What they’re seeing is a combination of the seasonal strength — back-to-school PCs,” said Krishna Shankar, an analyst at JMP Securities LLC. “And I think they’re seeing the positive impact of the early stages of corporate upgrade cycle for PCs and servers.”
The revision tops the average analyst forecast of $7.24 billion in sales, and earnings of 19 cents a share, according to Thomson Financial/First Call. Intel did not release an earnings estimate, but it did revise its gross margin forecast to 56% from 54%.
Shares of Intel, which is based in Santa Clara, Calif., rose as much as 10% shortly after the morning announcement but settled somewhat later in the day. The shares were up $1, nearly 4%, to close at $27.39 on the Nasdaq Stock Market.
Andy Bryant, Intel’s chief financial officer, characterized the improvement as strong seasonal business. That, analysts said, was a sign that the company’s visibility into the future is not so great.
“They’re not ready to call it a recovery yet,” said Dan Scovel, an analyst at Needham & Co. “The bulk of the strength they’re seeing is seasonal — and it’s higher than normal — but it’s not beyond seasonality.”
Intel also could be reaping the benefits of its move toward higher-margin products, such as chips for notebook computers and servers. Bryant, however, wouldn’t talk about specific areas that are showing the most growth. The company did say its communications chip unit, which is separate from the architecture group, remains soft.
Bryant struck a note of caution, saying that it’s unclear whether the momentum of the first part of the third quarter will sustain itself in the coming weeks. The company plans to release a mid- quarter update on Sept. 4.