July 14, 2004 – Intel Corp. boosted sales and earnings in 2Q04 in line with estimates, but indicated no changes in its plans for second-half capital spending, and quietly hinted at a slightly cloudy outlook later this year.

Second-quarter revenues were $8.05 billion, roughly flat with 1Q04 and 18% higher than 2Q04. A 2Q profit of $1.8 billion also was flat sequentially, but nearly double the earnings from a year ago. Through the first half of 2004, Intel’s sales were $16.14 billion, 19% ahead of a year ago, with a profit of $3.49 billion compared with $1.81 billion in 1H03.

The results included the company’s recent recall of Grantsdale chipsets, which resulted in a $38 million charge. Inventory levels grew about 15% to $3.22 billion, with half of the gain from microprocessors and half from flash memory and chipsets.

For 3Q04, Intel predicts revenues of $8.6-$9.2 billion, roughly 10% sequential growth, with earnings of 32¢/share and margins of 60%–a dropoff from the company’s previous predictions of 62%, due to a foreseen slowdown in chip margins and lower ASPs, and unit costs not dropping as expected. Intel didn’t change its capital-spending estimate for 2004 of $3.6-$4.0 billion.

The company also said it will begin production of its 90nm flash products on 200mm process technology in 3Q04, and expects a crossover in total microprocessor shipments from 130nm to 90nm by the end of this year. — J.M.