In spite of consistently bleak reports from nearly everyone else, Intel today led a stock market rally after its earnings reports exceeded expectations and put investors back in a buying mood.
The company reported yesterday after the close of the market that per-share earnings for the second quarter rose 18 percent over last year and that quarterly net income exceeded $1 billion for the first time. The news reversed the Nasdaq index from what had been a steep and serious decline, an about-face that reflects Intel's ever-increasing importance as the industry bellwether for the health of the PC hardware market.
The Nasdaq composite registered broad gains, moving up 33.18 points in trading today after posting a 43.3-point loss on Tuesday. Intel's stock closed at 71-5/8, up 1-5/8.
Intel, which is an investor in CNET: The Computer Network, posted total revenue of $4.62 billion for the quarter ending June 29, 19 percent higher than the second quarter last year but about even with the $4.64 billion reported for the first quarter. Net income came in at $1.04 billion in the second quarter, up from $879 million for the second quarter last year. Earnings per share rose 18 percent from 99 cents for the second quarter of 1995 and 15 percent from $1.02 in this year's first quarter.
Whereas its competitors' second-quarter reports were practically universally glum, Intel's earnings were made possible by its increasing dominance not only in the PC microprocessor market but also in peripheral markets such as 3D graphics chips and accessories like Intercast PC-TV add-in cards.
"In what was clearly a tough quarter for the industry, we were pleased to set new records for unit shipments of both microprocessors and related chipsets. This record suggests that demand for high performance personal computers is fundamentally healthy," Intel President and CEO Andy Grove said in a prepared statement.
But another interpretation is that the market is fundamentally healthy for Intel but not for anyone else. Texas Instruments reported a steep decline in profits Tuesday to $76 million from $278 million the previous quarter.
AMD last week also reported a net loss of $34.7 million on sales of $455 million for the quarter ending June 30. And Motorola reported last week that second-quarter sales were down from a year ago. The series of poor reports--plus a bad quarterly news from Hewlett-Packard--had precipitated a rout of high-technology stocks that hadn't shown any signs of abatement until today.
Intel said it expects revenue for the third quarter of 1996 to be about equal to this quarter, explaining that July and August are typically slow sales months, particularly in Europe. Analysts agree on that point but have revised their earnings estimates based on the unexpectedly good second-quarter numbers.
Estimates from financial analysts on Intel's earnings per share now range from $4.50 to $4.53. Robertson, Stephens research analyst Dan Klesken says that Intel performed better than expected under tough market conditions and that he and analysts at several other investment firms are recommending Intel stock.
Intel's wasn't the only good news. Excite, an Internet search engine company, declared a $2 million loss, but with revenues up 85 percent over the previous quarter, it was a much smaller loss than the last quarter. That and anticipation of its proposed merger with The McKinley Group, which runs the Magellan search site, helped boost Excite stock by 7/8 of a point to 6-3/4 today.
Computer Associates also reported that revenue for its first quarter was up 37 percent to $577 million and net income of $120 million, up 35 percent over the same quarter a year ago. First quarter income per share was $0.32 per share, up 39 percent from a year ago.
But the market is still too unstable for many companies. Earthlink Network, an Internet service provider, announced today it is delaying its IPO, citing the "current situation in the high technology marketplace." The company was seeking to sell 3,600,000 shares at a price between $10 and $12 per share. Wired Ventures, the company that publishes Wired magazine and the HotWired Web site, has also decided to delay its public offering.