NEW YORK -- Wall Street analysts were stunned by Intel Corp.'s plans for $7.5 billion in capital spending during 2001--a total that was $3.5-to-$2.5 billion more than expected, according to Goldman, Sachs & Co. today.
On Tuesday afternoon, Intel announced plans to increase capital spending 12% in 2001 from last year while posting sales of $8.7 billion for the fourth quarter of 2000. Intel also said it expects revenues in the first quarter of 2001 to be 15% lower than Q4 (see Jan. 16 story). But the Santa Clara, Calif.-based chip giant isn't backing off big investments. Intel said the planned increased in capital spending was needed to accelerate the use of 0.13-micron processes and 300-mm wafer fabs.
In a newsletter sent to investors this morning, the Goldman Sachs U.S. Research unit in New York said Intel's $7.5 billion capital spending budget was above its own estimates of $5 billion and Wall Street's consensus of $4 billion. The brokerage firm cautioned investors that Intel's unexpected increase in fab investments will not bail out the troubled semiconductor equipment industry in 2001.
During last week's Industry Strategy Symposium (ISS) in Pebble Beach, Calif., industry analysts lowered their growth forecasts for chip production systems to a range of 12-to-4% in 2001 after last year's boom in spending of more than 80%. Some analysts at the annual meeting said a decline in semiconductor capital spending in fab gear was possible this year, considering the high levels of uncertainty now facing the IC marketplace (see story).
The immediate question, said Goldman Sachs analysts, is: Who will benefit from Intel's increase in capital spending? The most likely candidates are large, leading vendors of copper processing tools, inspection and measurement systems and 300-mm equipment, such as Applied Materials, ASM Lithography, PRI Automation, KLA-Tencor, Lam, Novellus, and Teradyne, suggested the brokerage firm.
On Tuesday, Intel said it expects to lower the cost of microprocessor production by 30% with 300-mm wafers and advanced process technologies. But the company is also making cost cuts in other areas as it plans to spend more on fabs. During a conference call with analyst after releasing the fourth-quarter results, Intel said it was planning to close a printed-circuit board factory in Puerto Rico and it is freezing new hires (see Jan 16 story).
Apparently investors liked Intel's moves. In early trading today, Intel stock on the Nasdaq exchange was up $1.50 to $32.875 from Tuesday's close of $31.375.
