Intel Sees Strong 3rd-Quarter Sales on PC Growth
In a sign that the semiconductor and PC industries could finally be emerging from a prolonged slump, Intel Corp. said Thursday that its third-quarter revenue will rise 8% to 10% over the second quarter, a substantial increase from previously anticipated flat sales.
“Intel is certainly the bellwether company in the PC marketplace because they are seeing demand from all the PC suppliers,” said Linley Gwennap, a chip analyst with MicroDesign Resources in Sebastopol, Calif. “There have been a lot of questions about how far down the industry would go, and this is the first clear sign I’ve seen that the industry is starting to turn the corner and pick up some steam going into the second half of the year.”
Santa Clara, Calif.-based Intel, the world’s largest manufacturer of microprocessors, attributed the revised forecast to stronger-than-anticipated growth in its North American and European markets, but it declined to comment about the impact on its third-quarter profit.
“The increase in demand that we’re seeing is broad-based in several ways,” company spokesman Tom Waldrop said. “It’s strong for all members of the Intel processor family. It’s broadly based geographically, but especially in North America and Europe, and it’s across all of our sales channels,” including PC makers and chip distributors.
Intel shares lost $2.19 on Thursday to close at $79.06 on Nasdaq. But in after-hours trading, they rose as high as $83.69.
“The third quarter traditionally is up over the second quarter,” said Dean McCarron, an analyst with Mercury Research in Scottsdale, Ariz. “We’ve not seen a complete return to the industry’s previous strength, but we’ve seen a definite strengthening in the market for PC components.”
Mercury is forecasting a 16% rise in PC microprocessor sales in the third quarter, which normally foreshadows similar gains in PC sales by about a quarter.
International Data Corp., a Framingham, Mass.-based market research firm, estimates that worldwide PC shipments in the second half of 1998 will rise about 12.2% compared with a year earlier, up from 9.6% growth in the first half, despite continuing weakness in the Asian market. A number of PC companies, including Apple Computer Inc. and Dell Computer Corp., expect strong second-half growth.
Analysts expect a number of chip companies to benefit from the increase in PC sales, particularly because computer makers are increasing production, having finally reduced bloated inventories.
The increased demand “would imply that the fourth quarter, which is the big quarter, could be a happy Christmas for all the semiconductor vendors,” Gwennap said.
“When you talk about the end of a slump, it doesn’t mean you break out into a clear, blue sky, but if the world economy doesn’t enter a prolonged slump, we’ll see a much better semiconductor market in six months than we’re seeing today,” said chip analyst Jonathan Joseph of NationsBanc Montgomery Securities in San Francisco. He predicted that chip suppliers to the PC industry, such as Micron Technology Inc. and Texas Instruments Inc., will show improvement soon.
“If you look at the semiconductor industry as a whole, which is in much worse shape than the PC industry,” Gwennap cautioned, “there is still overcapacity in the memory area and lots of problems in Asia. So it will take some time to bounce back, but the PC industry will be the driver of this.”
Nathan Brookwood of San Jose-based Dataquest was even more cautious. “For an overall chip-industry turnaround, we’re still skeptical that anything dramatic will happen before the second half of 1999,” he said.
