Intel misses 2Q profit, to cut 4000 jobs

NEW YORK (CNN) -- Intel Corp. Tuesday said it will eliminate roughly 4,000 jobs in the second half of the year after reporting a second-quarter profit that fell short of recently reduced estimates.

Executives of the world's largest chipmaker also provided a cautious outlook for the third quarter and the remainder of the year, as large corporations continue to curtail their information technology spending amid economic uncertainty.

"For the full year of 2002, we continue to expect a second half that is seasonally stronger than the first, but have tempered our expectations for growth," Andy Bryant, Intel's chief financial officer, said on a conference call Tuesday evening.

"Looking back we are comfortable that our business has stabilized and the year-to-year declines we saw in 2001 are behind us," Bryant added.

"Looking forward, however, we have yet to see the momentum of the economic recovery in our business. As a result, we will be adjusting our staffing expenses accordingly."

Follows 7000 job cuts

The job reductions represent roughly 4.8 percent of Intel's global work force of 83,000 and follow a job-action that affected some 7,000 employees last year.

The cuts will be made primarily through attrition, voluntary separation programs and targeted reductions in certain business areas, Bryant said.

He did not say which specific areas would be affected nor provide specific details on how much cost savings the cuts would achieve.

"I don't think I see any benefits in the immediate quarter," he said.

Shortly after the closing bell Tuesday, Intel reported second-quarter earnings, excluding acquisition-related costs, of $620 million, or 9 cents per share. That's down from $854 million, or 12 cents per share, during the same period last year.

Analysts on average had expected Intel to report a profit of 11 cents per share, according to a survey conducted by First Call. Most company watchers recently lowered their estimates after Intel warned of a shortfall early last month.

Softer demand in Europe

Blaming softer-than-expected demand in Europe and a larger-than-expected proportion of revenue from low-end microprocessors, on June 6 Intel lowered the bar for the second quarter, saying it expected second-quarter revenue to be between $6.2 billion and $6.5 billion.

The company entered the quarter targeting revenue in a range between $6.4 billion and $7 billion.

At the same time, Intel said its second-quarter gross margin, the percentage of sales remaining after subtracting product costs, would be 49 percent, "plus or minus a couple of points,"

The company typically does not provide earnings-per-share estimates, choosing instead to set expectations for gross margins.

Including acquisition-related costs, Intel's net income for the quarter was $446 million, or 7 cents per share. That compares with net income of $196 million, or 3 cents per share, in the year-ago quarter, which included 9 cents per share in acquisition-related costs.

At $6.3 billion, Intel's second-quarter revenue was essentially flat with the year-ago quarter and in line with the consensus estimate of analysts, according to the First Call survey.

AMD also lowers targets

Advanced Micro Devices, which ranks a distant second to Intel in PC processor and flash-memory sales, lowered it financial targets twice over the past three months, most recently on July 3 when it said its revenue for the second quarter was roughly $600 million.

AMD began the quarter expecting to post revenue between $820 million and $900 million.

For the third quarter, Intel said it expects its gross margin to be 51 percent, give or take a couple of points, and its revenue to be in a range between $6.3 billion and $6.9 billion. The most recent consensus estimate was $6.7 billion.

The second half of the year typically is stronger for Intel as sales of PCs and other electronics increase during the back-to-school and holiday seasons. Bryant said the company expects to see "moderate seasonal trends into the second half of the year."

Shares of Intel rose 26 cents to $18.62 in extended-hours trade after falling nearly 4 percent on Nasdaq ahead of the earnings release.