Intel Execs: Goodbye 2001, Hello To Lower Costs, Brisk Channel Sales

Still cautious over economic rebound

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Working to turn the page on a dismal 2001, Intel executives said brisk sales of Pentium 4 processors, new process technology and strong channel sales are key positives to start 2002.

In a conference call with financial analysts following the release of its fourth-quarter earnings, Intel Executive Vice President Paul Otellini heralded the company's distribution channel in discussing Pentium 4's sales strength.

"On a worldwide basis, we set another record for microprocessor sales out throughout our distribution channel," Otellini said of Intel's fourth quarter. "Pentium 4 processors represented 40 percent of processors sold through this channel."

Overall, Intel turned in fourth-quarter sales of $7 billion and a profit of $998 million--both numbers exceeding Wall Street expectations despite a steady decline from 2000.

"We're pleased to report that 2001 is over," Intel CFO Andy Bryant said. "And we're ready to start 2002." Bryant said 2001 ended "on a note of stability" and that Intel has now seen four straight quarters of "seasonal" sales patterns.

However, Bryant and Otellini both voiced caution over the coming quarters, saying there has been no indication of a worldwide economic turnaround following from the recession that began last year.

"We are still waiting to see if there will be Fortune 500 resurgence in terms of purchases," Otellini told analysts, saying he had not yet seen evidence of such a resurgence.

Significantly, Intel said it expects to spend $5.5 billion on capital items in 2002, a sharp decrease from the $7.3 billion it spent in 2001.

However, the executives said that the company's recent switch to manufacturing chips on 300mm wafers--rather than 200mm wafers it had previously used--will shave $1 billion off capital costs.

Bryant told analysts that he expects Intel's research and development spending would increase to $4.1 billion in 2001 from $3.8 billion in 2001. Much of that spending would go toward chips and chip-related products, memory and communication technology, he said.

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