One Year Ago: Intel's Euro outlook fits market whispers

This story first published June 2, 1997

Intel last Friday warned of gloomy PC sales in Europe in a message that got the Nasdaq market reeling in shock.

The chip giant said weakness in demand, especially bad in Europe, would likely lead to revenues five to 10 percent lower than in the first quarter.

Although the April-June second quarter is traditionally a weak one for the PC business anyway, the chip giant is such a bellwether of technology stocks and such a totem indicator of PC sales that its doom-laden prognostications had a huge knock-on effect in early trading. At one point, Intel's stock had fallen an amazing $23 and related stocks collapsed in sympathy. Eventually, Intel recovered to finish down $12.27.

An Intel UK spokeswoman said that there had been "a slight downturn in consumer spending" in Europe, possibly related to the malaise of the German economy and recent general elections here and in France.

"Customers are saying that the market is slow," said Richard Baker, European marketing manager for PC products at fellow chip maker AMD. "Basically, it's confusion: MMX was released in January, Pentium II is out, K6 is hanging around and the [Cyrix 6x86MX] is coming. Nobody knows what's going on."

Baker also said that there could be merit in the belief that many PC vendors have large inventories of older CPUs. "It wouldn't surprise me if [Intel] trashed the price of vanilla [non-MMX] Pentiums," he said.

Spencer Eccleston, sales and marketing director at chip upgrade maker Evergreen, said: "Everyone knows the market is slow at the moment; not much is moving."

Both Eccleston and AMD's Baker said that a slow market could work in favour of the likes of AMD and Cyrix as vendors and buyers alike look for optimum value.