Intel's first quarter 2003 earnings were slightly down compared to the same period last year, as higher demand for its processors was offset by lower demand for its flash memory products, Intel said in a release on Tuesday. The company did manage to exceed Wall Street's expectations for the quarter.
Revenue for the first quarter was $US6.75 billion, down slightly from $6.78 billion in the first quarter of 2002. Net income was $915 million, down from $936 million a year earlier. Earnings per share were $0.14.
Analysts surveyed by Thomson First Call had predicted Intel would post earnings per share of $0.12 and revenue of $6.69 billion.
Second-quarter revenue is expected to fall between $6.4 billion and $7 billion, although Intel hedged its predictions by noting in its release that "continued uncertainty in global economic conditions makes it particularly difficult to predict product demand and other related matters." The war in Iraq and the spread of Severe Acute Respiratory Syndrome (SARS) in Asia could affect demand for its products, Intel said.
"No-one can predict world events. But we are doing what we can to keep the company in the best financial condition possible," said Andy Bryant, Intel's chief financial officer.
Intel believes it lost market share in the flash memory market during the first quarter, said Paul Otellini, president and chief operating officer. The company raised flash memory prices in January, and the effects of a seasonal downturn in mobile phone purchases were exaggerated by a decrease in demand for higher priced products, he said.
"We think the move towards higher density phones is inevitable," Otellini said. But in hindsight, he said, Intel may have jumped the gun with its price increase and is looking now at alternate measures, including adjusting the price of its flash memory or re-emphasizing lower-density products.
The Intel Architecture business, which makes Intel's processors for desktops, notebooks, and servers, once again was the only segment of the company to post an operating profit, generating $1.91 billion.
While PC processor shipments have been at the high end of seasonal patterns for two straight quarters, Intel isn't ready to proclaim a recovery in the PC market, Bryant said. Growth was strong among Intel's mobile products, due mainly to the launch of Intel's Centrino package in March, Otellini said. Centrino is a combination of the Pentium M processor, a mobile chipset, and Intel's 802.11b wireless Internet chip. The company will follow up with a wireless chip that supports the 802.11a standard by the middle of the year, Otellini said.
"We'd expect to exit the year with the majority of our (mobile) shipments being Centrino, we see that conversion happening pretty rapidly," Otellini said.
The wireless communications and computing group, which makes Intel's XScale processors and flash memory, reported an operating loss of $94 million. The Intel communications group, which makes network processors, posted an operating loss of $140 million.
Intel reaffirmed its guidance for 2003 capital expenditures, expecting to spend between $3.5 billion and $3.9 billion. Spending on research and development for the year will be about $4 billion, the company said.
Asia-Pacific continues to be the dominant destination for Intel products. Revenue from the region, excluding Japan, made up 39 per cent of Intel's worldwide revenue, up from 36 per cent in the first quarter last year. Revenue from the Americas slipped a few percentage points, while revenue from Europe was up slightly. The company is beginning to see signs of corporate PC upgrades in Western Europe, Otellini said.