Intel Sales, Profit End '98 With Powerful Numbers (Y2K Comment)

Note -- Key Quote: ``Our estimates are that 1999 should be an even better year,'' Kumar said, ``unless the Y2K problem just knocks us all down.''

Actually Id think sales would boom during 1999. -- Diane

http://www.mercurycenter.com/premium/business/docs/intel13.htm

Published Wednesday, January 13, 1999, in the San Jose Mercury News

Intel sales, profit end '98 with powerful numbers

BY TOM QUINLAN Mercury News Staff Writer

Intel Corp. unveiled record sales and a surprisingly hefty fourth-quarter profit of $2.1 billion Tuesday, a strong finish to an off year during which profits dipped 13 percent.

By almost any measure, Intel's fourth quarter was a powerhouse. The $7.6 billion in revenues exceeded Intel's annual sales of just six years ago, and the profit tally set another record. Although company officials wouldn't release specific figures, sales of Intel's key products -- microprocessors, PC chip sets and flash memory chips -- were at an all-time high.

``They really kicked the walls down,'' said Ashok Kumar, a financial analyst with Piper Jaffray. ``To achieve these results, their gross margins on microprocessors had to have increased from about 60 percent to 67 or 68 percent for the quarter. That's unheard of.''

Intel's record-setting performance is expected to set the stage for a 1999 resurgence for the entire semiconductor industry.

Rival chip maker Advanced Micro Devices Inc. will likely post its second consecutive quarterly profit today, with consensus estimates anticipating earnings of 18 cents a share for the Sunnyvale company.

Intel had a difficult 1998 as well. For the first nine months of the year, the company was buffeted by the Asian financial crisis, a glut of PCs in retail outlets and a surge in sales of low-cost PCs that used processors from AMD and National Semiconductor Corp. subsidiary Cyrix Corp.

Since 1990, Intel's sales have grown by more than 20 percent each year. But in1998, its totals of $26.3 billion represented just a 5 percent increase, compared to1997 revenues of $25.1 billion. Profits of $6.1 billion were down by 13 percent, compared to 1997's earnings of $6.9 billion.

But in the fourth quarter, Intel's numbers were buoyed by its earlier response to these financial pressures -- it eliminated more than 3,500 jobs over the course of the year -- as well as strong demand for PCs at year's end, said Mark Edelstone, an industry analyst for the financial services firm Morgan Stanley Dean Witter.

``But really what we're seeing this quarter is the company bringing its prowess in manufacturing to bear,'' he continued. Intel is now doing virtually all of its manufacturing using a so-called 0.25 micron process, which allows the company to make its products smaller, faster and cheaper.

Kumar noted -- and Intel executive vice president Paul Otellini confirmed -- that the quarterly results were also a testament to the strength of Intel's higher-priced processor line.

In fact, Intel didn't sell nearly as many of its low-cost Celeron processors as it had anticipated, indicating that the company is still having difficulty in dislodging AMD at the low-end of the PC market. Meanwhile, it couldn't produce enough of its higher-priced Pentium II's to satisfy demand.

So far at least, analysts are anticipating a blowout 1999.

``Our estimates are that 1999 should be an even better year,'' Kumar said, ``unless the Y2K problem just knocks us all down.''

-- Diane J. Squire (sacredspaces@yahoo.com), January 13, 1999

Answers

wow, Diane, what a way to end an article...

Mike ====================================================================

-- Michael Taylor (mtdesign3@aol.com), January 13, 1999.

Of course, the head of Intel bought an iMac, and in an interview with TIME stated that he loved his iMac and felt the future of computing lay with Apple. Yes, absolutely true. :) :) :)

xxxxxxx xxxxxxx xxxxxxx

-- Leska (allaha@earthlink.net), January 13, 1999.

1999 should be a great year for Intel. There are many small and medium-size businesses out there that have no clue yet that they will have to upgrade.

Business could be even better for Intel in 2000, but from my take on their SEC 10-Q filing, they--how should I phrase this--probably won't have the production capacity then that they are expecting.

-- Kevin (mixesmusic@worldnet.att.net), January 13, 1999.

But, then again, there might be all those pesky Y2K lawsuits... I mean, some people may get the crazy idea that Intel products that they have purchased, especially within the last few years, should be free of such a defect -- and if not, then fixed without charge.

-- Jack (jsprat@eld.net), January 14, 1999.