Intel 3rd-Quarter Sales on Track to Meet Forecasts

Intel Corp. surprised investors Thursday by saying third-quarter revenue is on track with forecasts, despite the global slump in demand for computer chips.

Other tech bellwethers forecast mixed results--from cautious optimism at National Semiconductor Corp. to flat sales at Motorola Inc.and Broadcom Corp.

But it was Intel’s statement that sales for the three months ending Sept. 29 would be within the range of earlier forecasts that cheered analysts who expected grimmer news from the world’s largest computer chip maker.

Andy Bryant, Intel’s chief financial and enterprise services officer, said revenue would fall slightly below the midpoint of the range laid out in July’s second-quarter earnings report. At that time, Intel executives estimated revenue between $6.2 billion and $6.8 billion.

“The quarter is proceeding essentially as expected,” Bryant said, adding that the second half of the year should be better than the first. That’s due more to seasonal changes, such as an increase in sales during the holidays, than a strengthening economy.

Analysts said the company appears on track to earn about 10 cents a share on third-quarter revenue of about $6.4 billion.

“The consensus view over the past couple days was that Intel was going to miss or say something terrible,” said Hans Mosesmann, an analyst at Prudential Securities. “This is pretty good.”

Investors expecting bad news pushed down the price of Intel shares by $1.37, to $26.10 on Nasdaq, before Bryant spoke after the close of trading. Bryant’s comments pushed up the price to $26.75 in after-hours trading. Intel’s shares have lost 60% of their value in the last year.

Intel has been pummeled by declining demand for new computers, caused by a dearth of compelling reasons for many users to upgrade and by the generally soft economy. Those factors have sparked a bloody price war with other computer chip manufacturers, cutting into profit.

Worldwide, PC sales were down 37% in July, prompting Intel to slash prices on some of its flagship Pentium 4 chips by more than half. Chip sales in July fell to $10.9 billion, from $17.3 billion a year earlier, according to the Semiconductor Industry Assn., and were down 6.1% from the previous month.

National Semiconductor, another key chip maker, reported a $54.6-million loss for its first fiscal quarter, which ended Aug. 26. But Chief Executive Brian Halla raised hopes during an interview with Bloomberg Television that the worst was over.

“The orders are running pretty well in this quarter ahead of what they were last quarter, in fact, substantially ahead of what they were last quarter at this time,” he said.

That optimism was tempered by a warning from Motorola Inc. that its sales would be flat in its third quarter. The company had expected sales to rise 5% from the second quarter. Because of the shortfall, Motorola said it will cut an additional 2,000 jobs. It already has eliminated 30,000 jobs.

Broadcom, the largest maker of chips for cable modems, followed in Intel’s footsteps, announcing that guidance it offered in July still was still. The company expects its earnings to be relatively flat for the third quarter, despite declining expenses.

Rob Enderle, a technology analyst with Giga Information Group, said investors have come to expect bad news, which is why Intel’s stock plunged before the announcement.

“Certainly, the Compaq-HP merger announcement put a pall on everything associated with computers. But Intel’s announcement may do positive things for the market,” he said. “But when people are afraid that things are going to get ugly, things do tend to get ugly.”

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