During a conference call with analysts here today, Intel executives declared that the PC market has "stabilized" and entered into more normal business cycles. But company executives were also quick to point out that its communications chip and hardware lines remain soft.

Intel--which is in the midst of a major workforce reduction and other cost-cutting moves--claimed that it's capital spending will remain at $7.5 billion level in 2001. The company insisted the figure is key to ramp up its new Pentium 4 microprocessor lines for the mainstream PC markets.

The mixed forecast prompted Intel to predict that its sales for the second quarter of 2001 will range from $6.2-to-$6.8 billion. That represents anywhere from a 2% increase to a 7% drop from the first quarter of 2001.

"Our microprocessor business appears to have stabilized and we expect to see normal seasonal patterns going forward from our current business level," said Craig R. Barrett, president and chief executive of Intel. "In our communications businesses, we are experiencing continued softness."

While Intel indicated that there were some positive signs in the second quarter, the company reported revenue of $6.7 billion in the first quarter, a 16% decline from the like period a year ago and down 23% sequentially.

For the first quarter, net income, excluding acquisition-related costs, was $1.1 billion, down 64% from the first period of 2000 and down 58% sequentially.

First quarter earnings, excluding acquisition-related costs, were $0.16 per share, a decrease of 63% from $0.43 in the first quarter of 2000 and down 58% sequentially. The company was expected to earn $0.15 a share, according to estimates from First Call/Thomson Financial.

Including acquisition-related costs, in accordance with generally accepted accounting principles, first quarter net income was $485 million, an 82% decline from first period of 2000 and down 78% sequentially.

In the first quarter, the company's core microprocessor lines were down in all sectors: desktop, mobile, and servers, said Paul Otellini, executive vice president and general manager of the Intel Architecture Group. Business also remains weak in all geographic sectors, except for China, Otellini said.

During the conference call, however, Otellini hinted the downturn in the PC market may have hit rock bottom and that the business has entered into more of a "normal business cycle" in the second quarter of 2001.

"Our business in the distribution channels is very good," he said. "We are looking at a larger second half of 2001 than in the first half."

Sales of the Pentium 4 remain strong, he insisted. "The product remains on track to become our fastest growing microprocessors," Otellini told analysts.

He added that Intel is on track to transform the Pentium 4 from a workstation-only processor into a mainstream MPU by the first quarter of 2002. "We would like to do that in late-2001," he added.

Analysts believe the company is projected to ship 20-to-25 million units of the Pentium 4 processor this year.

Intel recently moved to ignite the demand for the Pentium 4. In a series of rapid-fire cuts that began earlier this month, the company set plans to slash the price of the chip by up to 50% (see April 13 story ).

The company is also on schedule with its upcoming Brookdale chip set line. At present, Intel's Pentium 4 processor only supports Rambus Inc.'s high-speed RDRAM memory architecture.

Initially, Brookdale will support SDRAM. The SDRAM-based version will be rolled out in the "peak selling season" this year, he said. Following that product, it will offer a chip set that supports DDR SDRAM, he added.

In the meantime, the company continues to cut costs. Citing weakness across its entire IC business, Intel last month announced it will reduce its headcount by 5,000 jobs, or 5.7% of its workforce, in the next nine months, and it lowered its forecast again for the first quarter (see March 8 story ).

Earlier this year, Intel announced it was freezing pay raises, cutting discretionary spending, and letting job openings go unfilled to reduce expenses in 2001 (see Feb. 20 story ).

And Intel announced it was closing a printed-circuit board plant in Puerto Rico to lower costs (see Jan. 16 story ).