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Intel Q3 sales to hit $6.5bn – CFO

If September's sales ramp like they've done before...

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Intel CFO Andy Bryant last night reiterated the company's forecast that its Q3 sales revenue will fall within his previously stated $6.2-6.8 billion range, probably just below the midpoint figure of $6.5 billion.

There's a caveat, however. Bryant said that that target will be met only if sales in September follow the pattern laid down in previous years. On other words, Intel's forecast is based on a significant upturn in sales this month after a decline through July and August.

If Bryant's prediction is realised, Intel will have done better this quarter than last. During Q2 it recorded sales worth $6.3 billion. The difference is a little more than small change, but it doesn't exactly mean Q3 will have been significantly better than Q2. That, in turn, suggests that the September upturn - the back-to-school sales period - won't be as pronounced as in previous years, which means it's less safe to rely on.

In short, it's as likely to under-perform as over-perform, and Intel could find itself posting $6.3 billion again, or less.

As we noted yesterday, Dell has already said it's not expecting September to perform as well as it has in the past, relative to the rest of the quarter. Other PC vendors, including Hewlett-Packard, have said as much too.

Even Bryant admitted that, traditionally, September is the "break or make" month for the third quarter, which ends 29 September. He also confessed that the company's deep price cuts, made 26 August, will hit Q3 revenues hard by cutting gross margins to 47 per cent. By the end of the year, margins should be back up to 49 per cent, he said. He didn't say so, but that's presumably taking into account further price cuts on 28 October.

What will boost margins are Intel's ongoing attempt to reduce its headcount by 5000 staff, most of which is being done through natural wastage, saving all those redundancy payments, and through cost-reductions at the company's manufacturing plants.

"We got 80 per cent of the additional manufacturing cost reductions we had wanted, which ended up cutting expenses over what was expected," said Bryant. Those reductions were initiated to cover the cost of the 26 August price cuts, he added.

Bryant reiterated Intel's goal of shipping 20 million Pentium 4 processors this year and the company's belief that it will meet the target.

Flash memory and networking and comms-oriented processors won't add much to the bottom line, however. Q3's Flash sales will be the same as Q2's, and the recovery in networking chip sales will "take a while to come". ®

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