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Intel layoffs and efficiencies mean brighter Q3

Gross margins will rise to 52 per cent

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Intel has predicted a bright third quarter, particularly in the US and Europe, because of what it described as stronger than anticipated demand. It has managed to cut its costs by laying off staff and improving its manufacturing process. That will mean its revenue for the third quarter will exceed its expectations. When it released its second quarter results in July, it had warned of flat expectations. Now Intel thinks its revenue for Q3 will be up by nearly 10 per cent, amounting to revenues of $5.9 billion. Gross margin will rise several points from the 49 per cent it reported in Q2 to 52 per cent. Part of the improved revenues in Q3, however, are are down to Intel's success in layoff stuff as well as increased efficiciencies at its manufacturing plants. Its expenses will be eight per cent higher than its Q2 expenses of $1.3 billion. It said it will now spend nearly $3 billion on R^D in this year. Capital spending for 1998 will amount to $4.7 billion, more or less flat from the same period in 1997. That estimate includes the acquisition of DEC's Alpha manufacturing facilities, which, ironically it will use to build chips for Compaq. Compaq may well use more Alpha chips than Merced chips. ®

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