Intel, which employs 4,200 people at its European microchip manufacturing base in Leixlip, Co Kildare, has reported a fall in profits in its latest quarter results, with earnings down by 29 per cent to $1.2 billion (£860 million) on the 1997 figure of $1.6 billion. The company has also warned that sales in the third quarter could be flat. The second quarter results show that revenues (sales) are down by $100 million, or 1.6 per cent, to $5.9 billion, a trend described by the company as "essentially flat". Earnings per share were $0.66, compared to $0.92 per share in the 1997 second quarter. This was below market expectations of $0.68 per share.
The results showed that earnings (after-tax profits) were down by 8 per cent from the first quarter's net income of $1.3 billion, but $165 million of this was due to "a non-deductible charge of approximately $165 million, or $0.09 per share, for in-process research and development associated with the acquisition of Chips and Technologies Inc". Revenues were higher from the Americas and Japan than in the first quarter of 1998, but were "relatively flat" in Asia-Pacific, "while Europe was lower in the second quarter".
But a spokesman for Intel said that the overall European market had grown by 14.8 per cent compared with the 1997 second quarter. Inventory levels had been higher than normal entering the 1998 second quarter, in the transition to the Pentium II processor for mainstream PCs.
He added that Dataquest, the computer industry analyst, had recently revised their PC market forecast for Europe up to 20 per cent growth rate for the business PC market and 24 per cent for the consumer segment. "Year on year, Europe is up as a percentage of Intel revenue, which underlines the strong demand in Europe," he said.
He added that there were no more reductions in employment numbers planned beyond the 3,000 for the corporation worldwide announced in April, "predominantly through attrition" of its global 67,000-strong workforce, to be achieved by the end of the year.
"The company reduced headcount by approximately 750 people, excluding approximately 1,800 people added as the result of the acquisition of Digital Equipment Corporation's semiconductor manufacturing business." The company's chief executive, Dr Craig Barret, said that the company had been strides towards increased productivity and competitiveness. "We have cut costs, extended our product line, and are ahead of schedule in using new manufacturing processes." In the second quarter, the company also repurchased 22.2 million shares at a cost of $1.7 billion in an ongoing programme.
Intel's share price on the New York Stock Exchange fell last night by $1 11/16 to $80 11/16 in profit taking.
