Intel CEO still hopes for H2 PC rebound

Yukari Iwatani

LAS VEGAS: Craig Barrett, chief executive of No. 1 chip maker Intel Corp.,

said on Tuesday he continues to hope for a recovery in demand for personal

computers in the second half of 2001, despite the current major slump in the

industry.

The European market is "okay" and, as expected, the United States

was the company's "primary weak point," Barrett told Reuters in an

interview at the Cellular Telecommunications Industry Association conference

here.

Barrett's comments come after Intel issued its third consecutive sales

warning earlier this month saying that first-quarter sales would fall as much as

25 percent to about $6.53 billion from the previous quarter as an economic

slowdown spread beyond personal computers to networking, communications and

server components.

"We're still hoping for a recovery in the second half," Barrett

said, who also added that the Asian market should be strong but didn't provide

specifics.

Some analysts have gone so far as to argue that the US technology industry

has entered a recession and that the PC market would indeed shrink from a year

ago in 2001 for the first time in its history.

US Bancorp Piper Jaffray analyst Ashok Kumar said in a note to clients on

Monday that the second half of 2001 will in fact not be a period of recovery and

should "result in negative unit growth for the PC market in 2001, a first

in its history."

"We do not believe that there will be a sustainable cyclical recovery

until the second half of 2002," Kumar wrote.

Also, Salomon Smith Barney analyst Richard Gardner wrote in a note to clients

on Tuesday that the "most recent U.S. PC retail sales data indicates

ongoing weakness in the consumer market" for the week of Feb. 25 through

March 3, with growth declining a steep 21 per cent.

Banking on a rebound, new businesses



But even as Intel and other firms in the high-tech sector suffer through a
slump, Intel says it still plans to spend $7.5 billion this year to move to more

efficient and cheaper chip-making technology and larger silicon wafers, which

also help to cut costs.

"We know it's is going to recover," Barrett said of the economy.

Intel has also been making aggressive pushes in recent years to broaden sales

beyond microprocessors for personal computers, servers and laptop PCs, which

account for about 80 per cent of the overall Intel revenue and virtually all its

profit.

For example, Barrett said that its networking and communications group, which

combines two of its previously separate units, now contributes 20 per cent of

the company's revenue. In the long-term, which Barrett didn't specify, he

expects that figure to grow to 50 per cent.

Also, Intel's Pentium IV chip, its newest chip, will hit its stride by the

end of this year in desktop computers, Barrett said, which is when Intel plans

to roll out the Pentium 4 with 0.13-micron technology in large quantities.

"I expect it to be the fastest growing micro architecture ever," he

said.

(C) Reuters Limited 2001.