Some Good News for Tech Sector: Intel Profit Up 18%
Bringing a welcome dollop of good news to the battered high-technology sector, computer chip giant Intel Corp. said Tuesday that its profit rose a better-than-expected 18% in the second quarter and exceeded $1 billion for the first time.
Intel’s announcement, which came after the markets closed, was eagerly awaited during the wild market swings Tuesday as investors tried to divine whether technology shares were reaching their bottom or still had room to fall.
For technology watchers, the day began with Texas Instruments’ announcement that its quarterly earnings were off a whopping 73% from a year ago--news that helped keep technology shares on a steep downward slide that began last week.
TI said its net income for the three months ended June 30 plunged to $76 million, or 39 cents a share, on revenue of $2.85 billion. That was down from $278 million, or $1.44 a share, on revenue of $3.24 billion in the same period last year--well below Wall Street estimates.
But while TI’s results clearly reflected the fierce price cutting and excess capacity in the computer memory chip business, Intel is considered the bellwether of the all-important personal computer industry as a whole. And the Intel results indicated that the PC market, though no longer on the hyper-growth track of last year, remains robust.
Intel said net income rose to $1.04 billion, or $1.17 a share, from $879 million, or 99 cents, in the same period last year. Revenue rose 19% to $4.62 billion from $3.89 billion.
The results exceeded Wall Street expectations--the mean analyst estimate was $1.09 a share. Weaker-than-expected earnings or warnings from blue chips such as Motorola Inc. and Hewlett-Packard Co. sent many tech stocks into a free fall last week, and many hope the Intel report will stem the slides.
“I would think this should provide some boost” today, said analyst Charles Boucher of UBS Securities Inc.
Intel Chief Executive Andrew Grove said the company’s performance reflects a “fundamentally healthy” market for personal computers.
“In what was clearly a tough quarter for the industry, we were pleased to set new records for unit shipments of both microprocessors and related chipsets,” Grove said. “This record suggests that demand for high-performance personal computers is fundamentally healthy.”
Intel was the most active issue on Nasdaq on Tuesday as investors speculated on the contents of the earnings report. The shares rose 87.5 cents to $70 on volume of 25 million shares. In after-hours trading, Intel rose $2 to $72 a share.
Intel, which dominates the hardware side of the PC industry with its Pentium and Pentium Pro microprocessors, said it expects third-quarter revenue to be about equal to that of the second quarter, noting that the summer is a tough season, particularly in Europe.
Disappointing results from Motorola and a warning about earnings from Hewlett-Packard last week were among the factors triggering a sharp stock sell-off. The drop was arrested in mid-session Tuesday after the Dow Jones industrial average had fallen below 5,200, near its 1995 year-end level.
Texas Instruments shares, after falling sharply Monday and early Tuesday, rebounded to end the day $2.50 higher at $44.75 on the New York Stock Exchange.
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