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Intel's Shares Sink More Than 3 Percent

Posted on: Friday, 5 December 2003, 06:00 CST

Intel Corp. shares sank more than 3 percent in early trading Friday after warning a day earlier of a $600 million charge after one of its wireless businesses failed to meet expectations.

The chip-making giant said Thursday it also expects revenue to be between $8.5 billion and $8.7 billion. In October, the company predicted sales would be $8.1 billion to $8.7 billion. The company does not announce profit estimates.

"It's one of those quarters where you'd like to celebrate the business, and you're looking at the fact you have to write off," said Andy Bryant, Intel's chief financial officer. "It's very uncomfortable and very negative."

In early trading Friday on the Nasdaq Stock Market, Intel shares were down $1.16, or 3.5 percent, to $32.38.

Analysts expect the semiconductor giant to post a profit of 29 cents per share on sales of sales of $8.53 billion for the three months ending Dec. 31, according to a survey by Thomson First Call. In the fourth quarter of last year, it posted sales of $7.16 billion.

"There were some expectations - certainly on my part, and maybe by others - that they might raise the upper end of the revenue range," said Rick Whittington, an analyst at American Technology Research. "They did not."

The Santa Clara, Calif.-based company said its core microprocessor business is "experiencing solid seasonal growth." Meanwhile, its communications chip business is on track with expectations.

But it would take a goodwill impairment charge of about $600 million related to its Wireless Communications and Computing Group, which makes components and software for cellular-handset makers and handheld-computer makers.

"The long-term growth expectations for this business are no longer projected to be as high as previously expected," the company said.

Whittington said Intel's strategy of selling a common hardware to cell phone makers does not seem to be paying off. Cell phone manufacturers want to differentiate their offerings, he said.

"AMD has used that as a selling technique to try to pry away some of Intel's cell phone customers, and it seems to have had an effect," he said.

Intel's microprocessor sales are not only benefiting from the overall strength of the computer market but also a shift in the popularity of notebooks, which carry a higher profit margin for the computer makers and component providers like Intel.

Intel has been heavily marketing its Centrino mobile technology brand, which includes a processor as well as a chip set and radio for wireless communications.

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On the Net:

Intel Corp.: http://www.intel.com

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