Intel's Networking Sales Surprisingly Weak

Intel says excess inventory and a robust second-hand computer market will hurt sales of chips for switches, routers, and other networking equipment through the second quarter. During Intel's first-ever mid-quarter financial update, CFO Andy Bryant said "the networking silicon business is weaker than we had anticipated." Uncertain economic conditions necessitated the mid-quarter update, the company said.

Intel doesn't break out sales figures for its networking products because they represent only a miniscule portion of overall sales. In its first-quarter earnings statement, the company noted that, in particular, shipments of fast Ethernet and Gigabit Ethernet connections were lower than fourth-quarter shipments. But, Bryant says, microprocessor and flash memory sales are on track to meet expectations.

Overall, he says, Intel will meet its earlier forecasts for the second quarter, though he cautions that results would be "slightly below the midpoint" of earlier forecasts. In April, Intel says it expected to post second-quarter revenue of $6.2 billion to $6.8 billion, record a gross margin of about 49% and report expenses of $2.2 billion to $2.3 billion.

Analysts are expecting the company to report per-share earnings of 11 cents. In the second quarter of 2000, Intel posted per-share earnings of 45 cents, including the cost of acquisitions. Intel is scheduled to announce July 17 its final results for the second quarter, ending June 30.