Intel rejuvenates communication biz

By : |April 12, 2004 0

Daniel Sorid

SAN FRANCISCO: Intel Corp., the world’s biggest maker of microchips, is freshening up its money-losing communications business with a new set of chips for cell phones, days ahead of its quarterly earnings report.

The Santa Clara, California-based company plans to introduce chips that will allow video conferencing on mobile phones and DVD-quality video playback on handheld devices. The new chips aim to inject some life into Intel’s communications business, which lost $858 million last year.

Intel combined its communications and data networking businesses last year after failing to gain traction in the fiercely competitive mobile phone chip business. Texas Instruments Inc is the largest supplier of cell phone chips.

Intel executives have blamed the unit’s losses partly on the slower-than-expected roll-out of speedy wireless data connections, as well as the video and messaging services that take advantage of that speed.

“Advances in wireless broadband demand a new kind of wireless device,” said Sean Maloney, the Intel executive vice president who last year took command of the company’s newly combined communications group, in a statement.

Analysts have turned more optimistic on Intel’s first-quarter results, but for an altogether different reason. Dell Inc, Intel’s biggest customer, last week tacked on another $200 million to its quarterly revenue forecast in response to strong demand for data-serving business computers and storage systems.

“We believe that Dell’s comments support our positive stance on Intel, as Dell’s improved outlook implies signs of an improved (information technology) spending environment — an important element to our favorable rating on Intel,” wrote Prudential Equity Group analyst Mark Lipacis in a recent note to clients.

Analysts expect Intel to report a profit of 27 cents a share on revenue of $8.17 billion, according to a poll of analysts by Reuters Research, a unit of Reuters Group Plc.

Intel’s profit is expected to take a hit from a settlement payment to Intergraph Corp, which had sued Intel for patent infringement.

With its new series of chips for cell phones and handhelds, Intel incorporates some features that have proven popular in its PC chips.

Its new mobile processors, code-named “Bulverde,” integrate multimedia and security capabilities as well as a power management technology similar to what is found in its notebook computer chips.

The chips will first be discussed at an Intel technology conference being held in Taiwan.

Despite Intel’s big bet on communications, investors are expected to pay closer attention to a more immediate concern: a build-up of unsold notebook computers in Asia.

Intel warned in a business update last month that inventory problems overseas could put a damper on its quarterly results. At the time, the company guided investors toward the lower end of its revenue-forecast range.

® Reuters 2004

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