Intel blames Europe for weak Q2

Intel last night announced that its revenues for the April-June second financial quarter were markedly down on the first quarter, confirming weak demand for PCs, particular in the consumer sector in Europe.

Revenues were $6.0 billion, up 29 per cent from last year's equivalent quarter but down 7.6 per cent on Q1. Profits were $1.6 billion, up 58 per cent year on year but down 17 per cent on Q1's £2.0 billion. Wall Street was unmoved and marked Intel shares up $2 yesterday; Intel had earlier issued a profits warning.

Dave Hazell, business development manager for northern Europe, said the shortfall was partly created by the high expectations set by Intel's first quarter.

"Q1 was a bumper quarter for the corporation and our best ever," Hazell said. "Seasonally, Q2 has been a weaker quarter but business demand in Europe remains very strong. The one area of weakness is in the consumer sector. The German economy has not been good and in France and the UK we've had elections."

Perhaps the most revealing statistic was that European revenues made up 24 per cent of revenues compared to 30 per cent a year ago. The chip giant also blamed inventories of vanilla Pentium chips as users moved quickly to adopt MMX processors. Unit shipments of processors, chipsets and motherboards were all down from the first quarter. Looking ahead, Intel expects a flat third quarter but is confident that it can return to very strong growth thereafter.

"Strong microprocessor shipments in the first quarter led to some inventory correction in the second quarter as the industry prepared for a rapid transition to processors with MMX technology," said Andrew Grove, Intel chairman and CEO.

Looking ahead, Hazell said Intel expects Pentium II to account for 20-25 per cent of all microprocessors sold in the second half of 1997, and to be Intel's dominant chip by mid-1998. "It won't quite be 100 per cent MMX by the end of the year because companies with long qualification cycles will still be buying some Pentium and Pentium Pro will still be going into some servers, but the rest will be MMX," Hazell said.