Intel Set to Release Financial Update

SAN FRANCISCO – Intel Corp. holds its first-ever mid-quarter update on Thursday, and while analysts don't expect the chip giant to say things are getting much worse, they aren't getting better very quickly, either.

When the world's largest semiconductor maker reported first-quarter earnings in mid-April, it forecast an unusually wide range for second-quarter sales of $6.2 billion to $6.8 billion amid flagging demand for its microprocessors, the primary computing engine of personal computers.

"If they stay within the range they provided, it seems they're looking at the low end," said Needham & Co. analyst Dan Scovel. "Business just has been really bad."

If Intel's sales fall within that range, that would imply a decline of as much as 25 from $8.3 billion a year ago and a decline from first-quarter levels of 7 percent or an increase of 2 percent.

The 23 analysts surveyed by Thomson Financial/First Call expect Intel to post per-share earnings of 8 cents to 13 cents and the mean forecast is for 11 cents. The mean sales forecast based on nine estimates is for $6.29 billion.

The Santa Clara, Calif.-based company has been hammered by the slowing U.S. economy and the resulting weak demand for its microprocessors and also by what could be the worst-ever downturn the semiconductor industry has seen.

Nonetheless, Intel said when it reported first-quarter results that it had seen some "encouraging" signs toward the end of the first period and it forecast a seasonally stronger second half. The open question is just how much stronger will it be than the miserable first half.

"We would expect the company to reiterate its outlook that (the second half) would be up from (the first half), though we do not expect to hear much about (the third quarter), given that it is still too early to give direction," wrote Salomon Smith Barney analyst Jonathan Joseph in a note to clients.

Intel's first-quarter net income plunged 82 percent to $485 million, or 7 cents a share, while sales declined 16 percent to $6.68 billion.

Intel shares have fallen 59 percent since hitting a record high of $74.88 on Aug. 31, 2000, while the Nasdaq Composite Index has tumbled 47 percent during the same period. Intel stock were up 70 cents to $30.43 in late trading on Wednesday.

"While we don't expect Intel to pre-announce outright, we believe that Intel may meet its (second-quarter) guidance by stocking the channel," wrote Credit Suisse First Boston analyst Charlie Glavin. "However, we estimate that Intel will need 50 percent of sales in the month of June to break-even with the March quarter."

Of course, Intel isn't alone in feeling the pain.

On Monday, the Semiconductor Industry Association said worldwide sales of semiconductors, battered this year by weakening demand for computers and other electronics, tumbled 4.7 percent from March to $13.7 billion.

In the latest sign that chip orders have not hit bottom, San Jose, Calif.-based Cypress Semiconductor Corp. said on June 4 its second-quarter results will be lower than it had earlier forecast as its sales have been cut in half during the last six months due to canceled orders.

"Everybody's trying to figure out what the bottom is and we've seen a couple of head-fake bottoms so far," Scovel said.