Intel earnings frustrate investors

Wednesday, Oct. 16, 2002 | 10:59 a.m.

SUN STAFF AND WIRE REPORTS

Striking a sour end note to a day when the stock market rallied, Intel Corp., the world's largest maker of computer chips, reported earnings Tuesday that sharply missed Wall Street expectations.

The company said its fortunes were not likely to turn around next quarter, and it was not seeing signs of a larger economic recovery.

"This should unfortunately short-circuit the rally -- big time," said Charlie Glavin, an analyst with ThinkEquity Partners, an investment research firm.

For its part, Intel attributed its performance to the fact demand for semiconductors was on the low end of seasonal patterns, and also to the company's increasing difficulty in finding ways to cut costs to cope with the lackluster economic conditions.

Intel said despite the weakness in its financial returns, it pushed ahead with the introduction of 18 new semiconductor products during the quarter and gained share in several crucial markets.

Still, during the third quarter, the company's sales were $6.5 billion, which was on the low end of its earlier projections. Its profits pro forma -- which excludes acquisition-related costs -- were 11 cents a share. That was 2 cents lower than the pro forma consensus projections of Wall Street analysts, who had been projecting sales of $6.9 billion.

Motorola

Motorola reported Tuesday that it slightly exceeded investors' diminished earnings expectations for the quarter that ended Sept. 30 but it had fallen well short of Wall Street's revenue projections.

The revenue shortfall overshadowed the news that Motorola's reported net profit of $111 million, or 5 cents a share, marked the first time since the end of 1999 that the company had completed a quarter in the black, based on generally accepted accounting principles.

In after-hours trading, investors drove down shares in the telecommunications and semiconductor giant, which is based in Schaumburg, Ill. The stock had closed unchanged during the regular trading session, at $10.10, before the earnings report was released Tuesday. The price fell as low as $9.30 in after-hours trading.

"People were looking for sequential growth," said Matthew Hoffman, who follows Motorola for SoundView Technologies Group. "But this continues to be a shrinking company."

The revenue shortfall appeared to arise from lower than expected sales in most of Motorola's major businesses, including its cellular phones, wireless networking equipment, semiconductors and broadband equipment for cable television systems.

Boeing

Boeing Co. reported a 43 percent drop in third-quarter earnings today as the unprecedented downturn in air travel continued to weigh heavily on its commercial airplane business.

The company also scaled back its outlook for both 2002 and 2003 results.

Net earnings for the July-through-September period were $372 million, or 46 cents a share, down from $650 million, or 80 cents a share, a year earlier.

Excluding non-recurring items -- which included a $63 million writedown of its investment in Teledesic LLC and after-tax gains of $67 million -- per-share earnings of 46 cents met the recently reduced consensus estimate of analysts surveyed by Thomson First Call.

Revenues fell 7 percent to $12.7 billion from $13.7 billion, primarily due to a steep dropoff in the Seattle-based commercial airplanes unit.

Pfizer

Propelled by solid growth from key medicines such as Lipitor and Viagra, Pfizer Inc. said today its third quarter net income rose 13 percent. Its results before charges narrowly beat Wall Street estimates.

The New York City-based pharmaceutical firm earned $2.35 billion, or 38 cents a share, during the third quarter, up from $2.1 billion, or 33 cents a share, a year earlier.

Revenue rose 12 percent to $8.73 billion, up from $7.82 billion a year earlier.

Merrill Lynch

Merrill Lynch & Co. said today its third-quarter net income rose 64.2 percent from a year earlier, as cost-cutting helped mitigate a drop in net revenue across nearly all of its businesses.

The New York investment bank and brokerage firm earned $693 million, or 73 cents a diluted share, in the third quarter. The results include $114 million, or 12 cents a diluted share, from a Sept. 11-related net insurance recovery.

Analysts polled by Thomson First Call were predicting per share earnings of 58 cents.

In the year-ago third quarter, Merrill Lynch earned $422 million, or 44 cents a diluted share. That result included $53 million, or 6 cents a diluted share, of Sept. 11-related expenses. Merrill earned $634 million, or 66 cents a diluted share, in the second quarter of this year.

Net revenue, or revenue minus interest expense, fell 15.2 percent to $4.36 billion, while non-interest expenses dropped 25.8 percent to $3.3 billion from a year earlier.

Ford Motor

Ford Motor Co. lost $326 million in the third quarter, largely because of losses related to the sale of a European vehicle repair business, but the automaker's profit before charges easily beat Wall Street estimates.

The world's second-largest automaker said today it had a loss of 18 cents a share in the three months ended Sept. 30, in contrast to a loss of $692 million, or 39 cents a share, in the year-ago period.

Ford, in the 10th month of a companywide restructuring, reported sales of $39.6 billion in the July-September period, a 9 percent increase over $36.3 billion the third quarter last year. Vehicle sales also rose 9 percent to 1.65 million units.

Excluding the charge related to Kwik-Fit, the European firm, and other one-time expenses, Ford had an operating profit of $220 million, or 12 cents a share, compared with a loss of $502 million, or 28 cents a share, excluding one-time items, in the same period last year.

The consensus forecast of analysts surveyed by Thomson First Call was that Ford would earn 3 cents per share in the latest quarter.

Nevada bank operators

Washington Mutual Inc., the largest U.S. savings and loan and a player in the Las Vegas market, said third-quarter profit was $976 million, or $1.01 a share.

Net income was $832 million, or 94 cents a share, a year earlier, Washington Mutual said in a statement. The Seattle-based company was expected to earn $1.01 a share, according to a Thomson First Call survey of analysts.

Capitol Bancorp of Lansing, Mich., reported a third-quarter profit of $4.4 million or 40 cents per share, up from $2.8 million or 35 cents. It owns Black Mountain Community Bank in Henderson and three banks in Las Vegas. They are Bank of Las Vegas, Desert Community Bank and Red Rock Community Bank.

Marshall & Ilsley Corp. of Milwaukee, which operates in Las Vegas, reported a third quarter profit of $119.2 million or 54 cents per share, up 43.1 percent from the year-ago quarter.

Colonial BancGroup of Montgomery, Ala., operator of branches in Las Vegas, reported operating earnings of $36 million or 30 cents per share, up 11 percent on a per-share basis.

Las Vegas-area banks

Business Bank Corp., the parent of Business Bank of Nevada, reported record net earnings for the third quarter of $600,000 or 35 cents per share compared to $220,000 or 13 cents in the year-ago quarter.

Chief Executive John Guedry reported improving trends in profitability and strong growth in loans and deposits "during a somewhat sluggish economy."

The Las Vegas company's loans and other assets as of Sept. 30 were $228.2 million compared to $184.1 million a year earlier.

Also, Henderson-based Bank of Commerce reported a pre-tax profit for the nine months ended Sept. 30 of $771,000, up from $271,000 in the year-ago period. Loans and other assets grew from $80 million to $107 million.