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Intel CPU biz ‘stabilises’

Barrett forecasts 'normal seasonal patterns'

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Intel saw profits slide more than 60 per cent in the first quarter, saying it expected sales to drop 20 per cent in Q2 from last year.

Excluding acquisition-related costs, the chip giant's net income fell 64 per cent from the previous year to $1.1 billion, and 58 per cent sequentially, for the three months ended March 31. Net income including acquisitions was $485 million, down 82 per cent on Q1 in 2000, and down 78 per cent sequentially.

Sales were $6.7 billion, down 16 per cent from Q1 2000 and 23 per cent sequentially.

"Our microprocessor business appears to have stabilized and we expect to see normal seasonal patterns going forward from our current business level," said Craig Barrett, Intel president and CEO.

"In our communications businesses, we are experiencing continued softness. Looking beyond the current environment, we believe our aggressive investment in new manufacturing technologies and the development of cost-competitive, leading-edge products is the winning strategy," he added.

Revenue for the second quarter was forecast at between $6.2 billion and $6.8 billion.

In January Intel just beat lowered sales forecasts for Q4, while warning that Q1 revenue would be down at least 15 per cent on the previous quarter (ten per cent worse than normal) "due to seasonal factors and the impact of slowing worldwide economies". In March it lowered this forecast even further, saying sales would likely be down 25 per cent on Q4.

At the time it also announced plans to get rid of 5,000 staff before the end of the year.

Intel today said it would stick to its plans for capital and R&D spending for 2001. But there are worries that the current economic downturn may force the company to cut back in these areas, causing chip shortages.

The slowdown has delayed the construction of one of Intel's planned three fabs (Fab 24), according to a report today by Cahners In-Stat Group. This fab, which supports 300mm wafers, has been put back from the second half of 2002 to the third quarter of 2003.

"If the PC slump continues, Intel may be forced to cut back capital and R&D spending, which could hamper a quick ramp up of the 0.13 micron process that is essential to bringing Pentium 4 into the mainstream," the report states.

"The Fab 24 opening delay and associated 0.13 micron capacity reduction could lead to a shortage similar to one that occurred in late 1999 and early 2000, when the company did not have sufficient capacity to meet rapidly increasing demand for the Coppermine-based Pentium III," said Kevin Krewell, senior analyst at In-Stat/MDR's Intel PC Processor Service.

The chip giant, whose business practices are currently the subject of a European Commission probe, slashed prices over the Easter weekend for its P4 and PIII chips by up to 19 per cent. Next weekend it is expected to launch its 1.7GHz P4 at $701. ®

Related Links

Cahners In-Stat release

Related Stories

Intel cuts desktop, mobile CPU prices by up to 23 per cent
Intel's Barrett gets $3.8m pay packet
Wall Street slashes Intel Q1s
5000 jobs to be axed as slowdown hits

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