Intel's Weaker-Than-Expected Earnings Estimate Zaps Tech Stocks in Asia
DALTON TANONAKA, CNN ANCHOR: Tech stocks across Asia got zapped by the earnings outlook at U.S. chip giant Intel. Tokyo's Nikkei fell to a four-month low. Seoul's Kospi slid to a three-month low. And Taipei's weighted index fell to its lowest level in seven years. After the Tuesday closing bell in New York, Intel reported earnings slightly better than Wall Street expected. But three months ago, it seemed Intel might be bouncing up from the bottom. Now that may not be the case, as CNN's Steve Young reports.</s>STEVE YOUNG, CNN CORRESPONDENT (voice-over): Its second quarter financial numbers show Intel's light at the end of the tunnel could be growing more distant. The company beat Street earnings estimates by two cents a share. But that was down dramatically from the second quarter a year ago, and 22 percent from just three months ago. CEO Craig Barrett said the microprocessor business did better than expected. But Intel's chips for telecommunications and flash memory remained soft. The company said revenue could be flat in the third quarter and it forecast a slightly lower profit margin.</s>DREW PECK, SG COWEN: Third quarter should be better than flat, and yet,</s>YOUNG: The company remains under intense pricing pressure from its smaller rival Advanced Micro Devices. Intel was forced to slash prices for its mainstream microprocessors over the weekend for the fourth time in four months. Now the question is: could the recovery in chips slide from the second half of this year to 2002?</s>JACK GERAGHTY, GERARD KLAUER MATTISON: That's possible. I would say unlikely because you'll probably get something better in the fourth quarter. You're going to get tax rebates, who knows, maybe another interest rate cut, but certainly people are going to have some money in their pocket for this Christmas selling season.</s>YOUNG: On its conference call, Intel said its order book would be where it's expected this time of year and it still believes it will benefit from a fourth quarter seasonal uptick.</s>YOUNG (on camera): Analysts say a major problem facing Intel is that its latest Pentium Four Microprocessor has been a market disaster because it's too big, runs too hot and too slowly. They don't expect the manufacturing problems to be solved until the second quarter of next year.</s>DALTON TANONAKA, CNN ANCHOR: For insights into Asia's chip outlook, we're joined now by Chris Hsieh, vice president and senior analyst at ING Barings in Taipei. Chris, do you see a questionable quarter ahead for Intel. Are you sharing all of that pessimism?</s>CHRIS HSIEH, VICE PRESIDENT, ING BARINGS: Well, we think the third quarter is likely to be worse then the second quarter, and we think the best situation is that we will see a flat quarter.</s>TANONAKA: OK, so pretty much in line with what others are saying. Now Taipei in particular, as you know, and as we reported, hasn't been weaker since November 1993. Now the problems there are much more than chip concerns, right?</s>HSIEH: Well, yes, I think that the problem here also belongs to politics and the slowdown of the overall economy.</s>TANONAKA: But when you say politics, what do you mean?</s>HSIEH: Well, we can still see the political fighting between the ruling party and the KMG parties, and we haven't seen equipment, among all the different parties in Taiwan.</s>TANONAKA: OK, regarding chips particularly though, Chris, is there no reason for any optimism within the chip sector.</s>HSIEH: Well, I think the third quarter is likely to be slow as well, but we still have hope on the fourth quarter. And if you look at the composition for the demand for semiconductors, 60 percent are coming from PC and the telecoms. We still think that the introduction of the final version of Pentium IIII is likely to stimulate some demand, and infrastructure, the telecom bid in the second half of the first quarter is likely to push the industry as well.</s>TANONAKA: What's your fourth quarter optimism based on? Is it just - - what is it based on?</s>HSIEH: Well, first of all, we -- aside from the slowing down of the global economy, and we do believe the current slowing down of the PC purchasing is also due to the delayed shipment of the finalized version of Pentium IIII, and since Intel is likely to introduce the finalized version of the Pentium IIII in the first quarter, so we see some extra demand there. And in terms of telecoms, we think the current problem associated with GPRS (ph) is likely to be resolved by the end of the third quarter, and in the first quarter, people will start building the infrastructure for GPRS, especially in the second half. So we still see something there.</s>TANONAKA: Chris Hsieh, ING Barings in Taipei, thank you for those thoughts. END TO ORDER VIDEOTAPES AND TRANSCRIPTS OF CNN INTERNATIONAL PROGRAMMING, PLEASE CALL 800-CNN-NEWS OR USE THE SECURE ONLINE ORDER FROM LOCATED AT www.fdch.com