The week in review: Intel's warning

The leading chipmaker shocks Wall Street with word that revenue will fall below analysts' earlier expectations.

5 min read
Leading chipmaker Intel shocked Wall Street this week with word that revenue will fall below analysts' earlier expectations.

The warnings, which blamed a Europe sales slowdown, caught many analysts flat-footed. The news sent Intel's shares down more than 20 percent on Friday.

Markets recovered slightly the morning after Intel's bad news, yet the surprise left many investors wondering why so many analysts had been off the mark with their prognosis for the PC industry. Some analysts say they underestimated the market shift to chip competitor Advanced Micro Devices, while others may have been blindsided because they lack sources in Europe.

Intel's customers, however, gave assurances that their industry is still healthy. Compaq Computer and Hewlett-Packard said business is in line with expectations. Dell said that it remains on track to reach its goal of 30 percent sales growth this year.

Dell's new design
Goings-on at Dell Computer were on the minds and lips of investors and industry analysts alike this week, as the direct PC seller unveiled a new look. During the company's annual DirectConnect conference in Austin, Texas, chief executive Michael Dell showed off a redesigned version of the OptiPlex, the corporate desktop PC that has been at the center of the company's rise.

The new OptiPlex GX 150, the most significant design change for Dell's corporate line in more than four years, is smaller than current Dell desktops and comes in gray rather than beige.

A shift in color wasn't the only change afoot. Dell also unveiled two new notebooks outfitted with antennas for connecting to computer networks and the Internet. The new Latitude C series corporate notebook offers integrated IEEE 802.11B wireless networking to allow employees to move from cubicle to conference room and remain online, without cables or wires. The technology offers transfer rates up to 11 megabits per second.

During a keynote address, the company's chief also fielded tough questions about the demise of WebPC, the company's stylish answer to Apple Computer's iMac that also led to new PC designs from Compaq, Hewlett-Packard and IBM. Dell unveiled WebPC at last year's DirectConnect event, only to pull the plug six months later because of lackluster sales.

"Cat" out of the bag
Online security has become a hot-button topic in the industry as well as in Washington. Following a security breach, the company behind a new type of scanning technology called the "CueCat" has been called to the mat by privacy groups.

The device, made by DigitalConvergence, allows Web surfers to scan bar codes in print articles to be automatically linked to related Web sites. Last week a security breach on the company's Web site exposed 140,000 consumers' names, email addresses and ZIP codes.

Denver-based Privacy Foundation has called for DigitalConvergence to remove a personal tracking feature within the device. It also asked the company to disclose more details about how information collected will be used.

Hundreds of thousands of the CueCats are being given away to consumers through partners such as RadioShack and Wired and Forbes magazines.

Changes at the top
A series of executive changes this week were greeted by Wall Street and technology experts with mixed reviews. Excite@Home CEO George Bell plans to step down as head of the high-speed Internet company as soon as a replacement is found. The company also is in the process of reorganizing its consumer broadband services unit, precipitating a number of managerial and service changes that might even include renaming the company.

Joel Klein, the head of the Justice Department's antitrust division who led the government's case against Microsoft, plans to resign at the end of September. As a political appointee of President Clinton, Klein faced replacement after the November presidential elections. Some legal experts praised Klein's tenure and said his departure will not have much effect on the Microsoft case, which is in the appeals process.

Separately, HP announced that Carly Fiorina has been named chairman of its board, a vote of confidence after her first year as president and chief executive officer. As chairman, Fiorina will succeed Rickard Hackborn, a former HP executive who will remain on the board of directors.

Calling all gadgets
The rivalry between Handspring and Palm was raised to a new level this week as Handspring unveiled plans for an attachment that will turn its increasingly popular handheld device into a cell phone. VisorPhone, which will be officially unveiled Monday, is the handheld start-up company's first foray into wireless communications. Existing products from Palm offer wireless Internet access, and Microsoft's Pocket PC has similar add-on options available in Europe.

Shares of the company rose at the end of the week following an analyst report that said the company's sales growth could outstrip that of rivals such as Palm.

"While Palm is the market-share leader, we believe that Handspring will show the greatest revenue and (earnings) growth, and therefore believe it should be trading at a premium," CIBC Oppenheimer analyst Thomas Sepenzis said in a note to clients.

Palm, aside from competitive pressures, this week ran into a few bugs. Antivirus software makers this week discovered the first virus targeting Palm owners, which immediately raised new questions about the security of handheld computers and wireless devices in general.

The Phage.936 virus was discovered by antivirus researchers at McAfee.com and Finland-based F-Secure. The virus erases third-party applications on infected Palm operating systems, filling the display screen with a dark gray box. Other than Palm handhelds themselves, two other such devices use the Palm OS: Handspring Visor and TRG Pro.

The virus comes on the heels of last month's release of the Liberty Trojan horse, the first known malicious program targeting the Palm OS. The Liberty Trojan horse duped some people into downloading a program that erased data. Palm so far has not received any complaints or reports of virus-infected Palm owners, however.

Also of note
Pressed by impatient investors to post profits, a number of high-profile e-tailers have raised their prices in recent months. Although the new, higher prices could shore up profit margins, they could also send shoppers elsewhere, even back to their neighborhood stores...Intel will release the Pentium 4 on Oct. 30, according to sources--not a moment too soon for the battered chipmaker. The Pentium 4, which will initially come out at 1.4 GHz and 1.5 GHz, will serve as the cornerstone of the company's processor line for the next several years...At least three renowned universities have decided against banning the use of the popular Napster digital music file-swapping software on their college campuses. Duke University, Stanford University and the Massachusetts Institute of Technology recently rejected a request by lawyers for some major music artists to halt the use of Napster.