This story was written by Keith Dawson for the Industry Standard's Media Grok email newsletter. It is archived here for informational purposes only because The Standard's site is no more. This material is Copyright 1999-2001 by Standard Media.

Intel Lowers the Limbo Stick

Mar 09 2001 12:00 AM PST

The chipmaker issues a profit warning and announces job cuts, and the game is far from over.

Such a familiar story. For the second time this quarter, Intel (INTC) revised its guidance downwards. The press covered the announcement en masse, but nobody had much fun doing it.

After saying in January that its first-quarter earnings might be 15 percent off from those of the previous quarter, yesterday Intel said that the decline would be more like 25 percent, and that the company will shed 5,000 jobs. Intel stock fell about 7 percent following the announcement in after-hours trading.

Intel's CFO promised guidance for the full year when first-quarter earnings are announced on April 17; he held out little hope for an upturn in 2001. The Merc quoted Needham & Co. semiconductor analyst Dan Scovel's mostly pessimistic take on the outlook: "There is a hope for recovery before the end of the year. Anything beyond that is a guess." CNET countered with Ashok Kumar of U.S. Bancorp (USB) Piper Jaffray pouring scorn over the idea of a quick upturn: "A recovery in the second half is a pipe dream," he said. "The question is second half of what year."

Several outlets mentioned weakness elsewhere in the semiconductor business. The New York Times mentioned National Semiconductor (NSM)'s announcement yesterday that it was reducing earnings expectations for the current quarter by 10 percent; the Merc mentioned similar moves recently by Broadcom (BRCM), LSI Logic (LSI) and Vitesse Semiconductor (VTSS).

The Wall Street Journal reported more of the fine grain of Intel's announcement than did most other outlets. Reporter Molly Williams noted that demand for Intel's chips had slackened more in the server end of the business than for workstations. Williams also relayed details of Intel's inventory buildup in the quarter.

Is there any glimmer of good news amid all the gloom? Intel said it was reducing R&D spending only minimally and was keeping all advanced programs in place. The L.A. Times and the Post replayed Craig Barrett's quip from last week's Intel Developer Forum: "You never save your way out of a recession."

CNET, which turned in one of the more extensive stories on Intel's news, apparently didn't want all the bad news to leave a sour taste with its readers. CNET also ran an upbeat story on early results from Intel's work on extreme ultraviolet lithography for chips four generations out from today's offerings.

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