Intel Reduces 1st-Quarter Sales Estimate, Plans Job Cuts

Computer chip giant Intel Corp. on Thursday sharply reduced revenue estimates for the first quarter and announced plans to cut 5,000 jobs to counter the effects of a worsening economy and slack demand for computers and electronics.

Santa Clara, Calif.-based Intel, the world’s largest semiconductor maker, said it expects sales to fall 25% from the fourth quarter’s $8.7 billion. In January, the company warned of a possible 15% decline in revenue in the first quarter.

Analysts were caught off guard by the size of the second revision for the quarter.

“This is much more than we were expecting,” said Sunil Reddy, co-manager of the Fifth Third Technology Fund, which owns about 6 million Intel shares. “It’s a reflection of the weak semiconductor market and the weak market for PCs.”

Investors had a similar reaction, pushing Intel shares down by as much as 7%, or $2.31, to $30.94 in after-hours trading. In regular Nasdaq trading Thursday, Intel shares rose 31 cents, to $33.25. The news rippled through the industry, depressing the stock prices of other major chip companies in post-market trading.

Intel is the latest in a string of chip companies to scale back revenue estimates this week. Also on Thursday, National Semiconductor Corp. posted sharply lower third-quarter earnings and warned that its fourth-quarter profit would fall well short of forecasts.

National Semiconductor’s stock shares slumped as low as $23.80 before rebounding to close at $25.25, up 41 cents, in Nasdaq trading.

Earlier this week, similar announcements came from Cypress Semiconductor, Broadcom Corp., LSI Logic Corp. and Vitesse Semiconductor. Others, including Texas Instruments and Motorola Inc., also have announced reduced sales forecasts and slumping orders.

And on Monday, a semiconductor trade group reported that worldwide sales of computer chips continue to fall. In January, chip sales dropped 5.7% from December levels, the third consecutive monthly decline.

“At this point, the industry appears to be staring into the abyss,” said Dan Scovel, a semiconductor analyst at Needham & Co. “There is a hope for recovery before the end of the year. Anything beyond that is a guess.”

Intel said it would report financial results for the three months ended March 30 on April 17. The company didn’t immediately say how, or if, the revenue shortfall would affect profit. Before Thursday’s warning, Intel was expected to earn 21 cents a share in the quarter, the average estimate of analysts polled by First Call/Thomson Financial.

Intel said in a statement that the economic slowdown, especially in technology, continues to affect demand for personal computers and has spread to other sectors, including networking, communications and servers.

The planned job cuts--nearly 6% of its 86,000-employee work force--will occur over the next nine months and will be achieved largely through attrition. The cuts are part of an overall cost-cutting program that first became public in late February. The company said then that it planned to save hundreds of millions by limiting discretionary spending, delaying pay raises and not replacing departing workers.

Intel now expects to cut expenses about 15% in the fourth quarter. This year’s research and development spending is now expected to be $4.2 billion, down from the previous estimate of $4.3 billion, the company said in a conference call.

The company also said it expects to take a larger first-quarter charge than it previously estimated for goodwill and other acquisition-related costs. Intel said the charge will total about $465 million, up from its forecast of $455 million.

Forecasts of $7.5 billion in capital spending in 2001 remained unchanged. The money will be used to expand production and implement new technologies, including ramping up production of its new Pentium 4 processor.

Rival National Semiconductor said its operating profit plunged 51% to $48.9 million, or 27 cents a share, for the quarter that ended Feb. 25. That was down from $99.8 million, or 51 cents, a year ago, as revenue fell 13%, to $475.6 million.

Analysts were forecasting profit of about 20 cents a share, according to First Call/Thomson Financial. On Feb. 1, National Semiconductor warned that spending cutbacks by its customers would result in third-quarter profit of 20 cents to 22 cents--well below the then-consensus estimate of 31 cents a share.

For its upcoming fourth quarter, National Semiconductor said it expects earnings of 3 cents to 5 cents a share, with sales as much as 10% lower than the third-quarter level, or as low as $411.8 million.

Analysts had been expecting fourth-quarter earnings of 23 cents and sales of $490 million, according to First Call.

The company said third-quarter worldwide bookings fell 30% from the second quarter of fiscal year 2001 and 38% from the year-ago quarter. After three consecutive months of declines through January, bookings grew in February, the company said.

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The Associated Press, Bloomberg News and BridgeNews were used in compiling this report.