Intel’s 3rd-Quarter Profit Rises 20%
Intel Corp. on Tuesday reported a 20% gain in third-quarter profit, slightly below expectations, as demand strengthened for its new microprocessors but unexpectedly weakened for flash memory chips.
Intel, the world’s largest maker of computer chips, earned $1.57 billion, or 88 cents a share, in the July-September quarter, up from $1.31 billion, or 74 cents a share, a year ago.
Revenue also rose 20%, to $6.2 billion from $5.1 billion, as the company posted record microprocessor shipments amid strong sales of its Pentium chips with multimedia-enhancing MMX technology.
“I would characterize Q3 as a solid quarter for us,” Paul Otellini, Intel’s head of sales and marketing, said in a conference call.
Analysts surveyed by IBES International Inc. had predicted average earnings of 91 cents a share.
The results were released after the Nasdaq stock market closed. Intel traded at $87.50 in after-hours trading, down sharply from the closing price of $91.81, which was off 75 cents for the day in very heavy trading.
The Santa Clara company’s performance is closely watched because its microprocessors are the brains of 85% of all personal computers. Its financial fortunes are considered a precursor for all PC-related businesses.
But with nearly 40% of all new PCs sold in the U.S. retail market now costing less than $1,000, Intel is forced to adapt to changing dynamics in that industry, where it makes a smaller profit on less-speedy chips, said Duane Eatherly, technology analyst at Banc One Investment Advisors in Columbus, Ohio, which owns Intel stock.
“They want people buying high-speed Pentium IIs and they’re not yet buying as many as Intel would like,” Eatherly said.
The company’s lower-than-expected results also were hampered by a lagging flash memory market, said Tom Waldrop, an Intel spokesman, adding that the weak market shaved about two percentage points off Intel’s third-quarter gross margin of 58%.
At a Glance:
Texas Instruments Inc.’s third-quarter profit soared to $239 million, or $1.20 a share, on lower costs and strong demand for specialized chips used in cellular phones and modems, even as its memory-chip business loses money because of falling prices. But weak revenue growth and the decline in memory prices overshadowed the surge in earnings, leaving investors and analysts disappointed and driving down shares of the Dallas-based company.
Bay Networks said fiscal first-quarter earnings rose more than sevenfold on strong demand for its equipment that ties together computers into networks. Net income rose to $41.3 million, or 19 cents a share, from $5.63 million, or 3 cents, in the year-earlier period, beating by a penny the average estimate of analysts.
