Intel Corp.'s recent warning of lower second-quarter revenue proved true Tuesday, as the Santa Clara, California, chip maker announced revenue of US$6.32 billion and net income of $446 million.
The company also announced that it will lay off 4,000 workers in the second half of 2002. Intel currently has about 83,000 employees, a figure that's already down 8 percent from the second quarter of 2001 due to earlier layoffs. Australian staff of Intel will be among mass layoffs with five Australian employees to be made redundant, an Australian company official has confirmed.
"We were hoping to see the beginnings of an economic recovery, but we didn't," said Andy Bryant, Intel executive vice president and chief financial officer, in a conference call with reporters and analysts to discuss the quarter.
The layoffs will occur primarily through attrition and voluntary separations, but might also include "business disinvestments," such as the closing of its Intel Online Services hosting division, which was announced last month.
Earnings per share for the quarter were $0.07, four cents off analysts' expectations, as polled by Thomson Financial/First Call. Intel also failed to meet analysts' revenue forecast of $6.35 billion. Intel warned on June 6 that second-quarter revenue would be between $6.2 billion and $6.5 billion, down from its previous guidance of $6.4 billion to $7.0 billion.
Net income was down 52 percent from first-quarter results of $1 billion, but up 128 percent from $196 million in the second quarter last year. Revenue fell 7 percent from first-quarter results of $6.78 billion, and stayed flat compared to the second quarter of 2001.
"Our revenues for the second quarter are seasonally down, in a difficult environment for sales growth," said Paul Otellini, president and chief operating officer. Revenue has declined in the second quarter in four of the last five years, Bryant said.
Excluding acquisition costs related to the purchase of Xircom Inc. in March 2001, net income was $620 million, and earnings per share $0.09. The company wrote off $112 million during the quarter just ended in acquired intangibles, or the value of Xircom's PC cards for wireline networking. An additional $106 million charge was taken for the closing of Intel Online Services.
Intel said third-quarter revenue will be between $6.3 billion and $6.9 billion. Capital expenditures for the third quarter will be less than expected, between $5 billion and $5.2 billion, down from expectations of $5.5 billion, due to "non-fab-related spending reductions," the company said.
Shipments from the Intel Architecture Group, which makes its processors and chipsets, were lower compared to the first quarter. The average selling price of those components also fell slightly from the first quarter, attributed to the sale of chips for Microsoft Corp.'s Xbox gaming system. Excluding Xbox processor sales, average selling prices remained flat, the company said.
The Intel Architecture Group helped carry other divisions in the company, reporting a $1.36 billion operating profit. Other businesses, such as the Communications Group and Wireless Communications and Computing Group, reported operating losses.
Intel's mobile segment produced a bright spot; new products such as the Pentium 4-M processor contributed to growth in that business during a seasonally down period, Otellini said. Intel expects growth of notebook processors to exceed desktop processor growth in the second half of the year, and is on track to release a new mobile chip, Banias, in the first quarter of 2003, he said.
The server market has also been strong, and with the release of Itanium 2, Intel expects to expand that strength, Otellini said.
For the second straight quarter Intel took in more revenue from Asia-Pacific than any other region, accounting for 38 percent of sales, up from 36 percent last quarter. Revenue from the Americas also increased proportionally, from 33 percent last quarter to 35 percent this quarter. The percentage of Intel's revenue from Europe declined, from 23 percent last quarter to 20 percent this quarter.
"Emerging markets are growing, while mature markets are weak," said Otellini.
Ahead of the results, Intel's stock (INTC) declined 4 percent Tuesday to close at $18.36. With 99 million shares traded, it was the day's most active stock on the Nasdaq.
- Helen Han contributed to this story.