Intel blew away Wall Street expectations last week, reporting a 58% increase in second quarter earnings.
The world's most successful chip maker earned $1.6 billion (#947 million), or 92 cents a share, for the three months ended 28 June 1997. Wall Street was expecting 90 cents per share. For the same quarter last year, Intel posted earnings of $1 billion, or 59 cents a share. Revenue for the three months rose 29% to $6 billion, from $4.6 billion in 1996.
The results were in spite of Intel struggling to keep up with demand for MMX chips, which it released last year. The company said it was boosting production of the chips at a "record rate" just to keep up.
Andy Grove, Intel's chairman and chief executive officer, said: "Strong microprocessor shipments in the first quarter led to some inventory correction in the second quarter as the industry prepared for a rapid transition to processors with MMX technology."
In a statement, Intel said demand in the second quarter is usually lower than in the first three months of the year. It also said the results were affected by weaker demand in Europe.
In a conference call with journalists, company executives confirmed that chip prices would be cut every quarter. Intel changed its price cutting strategy last autumn when it skipped pre-holiday reductions for the Pentium chip. Later this month, the company will be making further price reductions to chips across the board.
Results like these suggest that Cyrix and AMD are failing to make much progress in poaching Intel's business. Now with Intel planning to make price cuts every quarter, things can only get more difficult for the smaller chip vendors, who are both cutting margins to the bone.
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