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Intel shares rise on strong earnings report

The chipmaker's shares climb more than 9 percent following its robust quarterly earnings report.

Shares in chipmaker Intel climbed more than 12 percent this morning following a robust earnings report late yesterday.

Intel rose Craig Barrett $12, or about 13.18 percent, to hit $103.06 at the normal close of the markets. After missing estimates for the last two quarters, Intel yesterday easily strode past expectations for the fourth quarter by reporting record earnings of $2.4 billion.

The results will likely buoy the outlook for the company among investors. Analysts expected Intel to report fourth-quarter earnings of 63 cents a share, or approximately $2.2 billion, according to a consensus of analysts from First Call.

Analysts differ on the outlook for 2000. Some believe growth will continue because of server sales, while others see increases slowing because of competition.

"While (Windows 2000) will be a positive catalyst, the primary drivers of growth will be business-to-business applications and appliance servers," wrote Ashok Kumar, an analyst with US Bancorp. "We expect unit growth rate in 2000 to pace the 20 percent growth recorded last year."

By contrast, A.A. "Tad" LaFountain of Needham & Co. wrote: "Attention to costs allowed the resumption of extremely high margins even in the face of relatively moderate revenue growth. But we believe that Intel's future is decidedly more clouded than its remarkable past."

Excluding acquisition costs, Intel reported fourth-quarter earnings of 69 cents per share, an increase of 15 percent over earnings of 60 cents per share in the fourth quarter of 1998. Revenue increased 29 percent to a record $8.2 billion for the quarter.

The increase came from slightly stronger than expected processor sales, the effects of cost-cutting programs, as well as profit from the sale of stock. Stock sales accounted for five cents per share in earnings. Without the capital gain, Intel still beat estimates, but not by as wide a margin. "We are proud of our quarterly and annual records in both revenue and earnings," Craig Barrett, Intel CEO, said in a statement. "In 2000, we look forward to continued growth in our core microprocessor business and to the mid-year production of our new Itanium processor."

Including acquisition costs, earnings came to 61 cents a share, or $2.1 billion. Typically, analysts exclude acquisition costs. For the past year, Intel has been following an aggressive plan to expand into other markets, especially communications.

For the entire year, net income excluding acquisition costs came to $8.1 billion, 29 percent higher than net income of $6.3 billion in 1998. Earnings per share for the year came to $2.33 per share, a 30 percent increase over earnings of $1.79 per share last year.

Total revenue for the year came to $29.4 billion, a 12 percent rise over 1998. Profits rose faster than revenues in 1999 because of cost-cutting efforts in chip manufacturing and packaging, according to some analysts. In addition, the sale of equities boosted profits.

Intel divides to conquer? Acquisition costs came to $300 million in the fourth quarter--including amortization of goodwill and other write-offs--and $803 million for the year.

Although many analysts believe that 2000 will bring another strong year for Intel, others have stated that profit growth may begin to slow with increased competition, price declines and waning PC purchases. The company stated it shipped a record number of processors in 1999 and expects continued growth in 2000 after a slight seasonal dip in the first quarter.