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Intel Stock Battered By Poor Outlook
By Duncan Martell
| SAN FRANCISCO (Reuters) - Intel
Corp.'sINTC.O sour revenue outlook for the fourth quarter sent its shares
tumbling on Wednesday and weighed on broader markets, amid fresh worries
that recent glimmers of optimism for the technology industry were but a
flash in the pan. After markets closed Tuesday, Intel, the world's largest semiconductor manufacturer, posted higher third-quarter net income. But it also said fourth-quarter revenue would be lower than expected, with no signs yet of a recovery in the personal computer industry. "As long we have a soft market, earnings are going to be lower than we would like," said Andy Bryant, Intel's chief financial officer, in an interview on Tuesday after the company reported earnings. "The economy is still not recovering in our industry." Intel's results came ahead of some other top names in technology that were due to report later on Wednesday. International Business Machines Corp.IBM.N , Advanced Micro Devices Inc.AMD.N and Apple Computer Inc.AAPL.O all were expected to report after the closing bell on Wednesday. Shares of Intel, a component of the Dow Jones Industrial Average, fell $2.80, or 17 percent, to $13.72 in early afternoon Nasdaq trading, where it was by far the most actively traded issue. The stock has fallen some 56 percent so far this year. Intel also cut its annual capital spending budget to about $4.7 billion, lower than the expected $5.0 billion to $5.2 billion. That pressured shares of manufacturers of chip-making equipment, such as Applied Materials Inc.AMAT.O and Novellus Systems Inc.NVLS.O The Philadelphia Stock Exchange Semiconductor Index .SOXX fell 7 percent on Wednesday. RECOVERY IN TECHNOLOGY STILL MIA The sell-off whisked away gains scored in the past week by Intel, which had risen some 22 percent in that time. Broader markets in the past week also surged, driven by stronger-than-expected quarterly results in a still-slow economic environment. "The most accurate thing we can say is that there is no visibility to a recovery" in technology spending, said Dan Scovel, an analyst at Needham & Co. "That means the first half of next year is going to be tough." Blue chip stocks on Wednesday followed Intel lower, with the Dow slipping 150 points, or nearly 2 percent. With back-to-school sales coming in weak, Intel disappointed investors who had been looking for it to offer a more bullish forecast for the fourth quarter, the biggest for the personal computer industry. Intel forecast fourth-quarter revenue of between $6.5 billion and $6.9 billion, implying sales ranging from flat with the third quarter to up by about 6 percent -- far less than the typical 10 percent to 15 percent increase. In last year's fourth quarter, Intel posted revenue of $6.98 billion. Still, Lehman Brothers analyst Dan Niles wrote in a research note to clients that Intel's revenue guidance "seems reasonable in a slowly improving economic picture." INVESTORS LOOKING TO OTHER TECH FIRM RESULTS Investors seeking signs of even meager improvements in demand in the fourth quarter and next year may scrutinize results due in November from technology firms such as IBM and Hewlett-Packard Co. Intel is a lagging indicator for PC demand, because companies such as Dell Computer Corp., IBM, HP and other PC makers will see signs of increasing or decreasing demand before ordering more Intel Pentium, Celeron and Xeon processors. Moreover, Intel's Chief Executive Craig Barrett has said repeatedly that profits in industries the tech sector serves must rebound before demand improves for Intel and others. With a few notable exceptions, such as DellDELL.O , the PC industry has yet to recover from a dismal 2001 following a dismal 2001, when year-over-year sales fell for the first time since the mid-1980s. Some analysts are calling for flat sales in 2002. Analysts and market research firms have steadily ratcheted down estimates for 2002 worldwide shipments of PCs. (With reporting by Franklin Paul in New York) |
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