Computer chip giant, Intel, has said the weakened dollar should help drive personal computer (PC) sales in an already booming European market, while cautioning that growth remains a challenge in the long term. Growth in Europe would boost the company's plant in Leixlip, Co Kildare.
The dollar's fall - to 1.64 deutschmarks from 1.80 deutschmarks by August - is allowing US suppliers of personal computers to offer keener-priced machines, Mr Greg Pearson, head of Intel Europe, said.
"In general I think that has helped PC demand. It's really going to be a field day for consumers for the next few months," he said. Worldwide, however, Intel forecast only "slightly higher" sales in the fourth quarter than in the third, and Mr Pearson said boosting sales and profit against sharply falling chip prices would be a key issue over the next several years.
"Growth is still a challenge for us, even if you look at the third quarter," he said. "It isn't like it's substantial growth. Long-term, growth is still a number-one concern."
On Tuesday, Intel reported worldwide sales in the third quarter rose 9 per cent to $6.73 billion (£4.42 billion), while net profit was slightly lower at $1.56 billion.
Earnings per share were higher than expected, improving one cent to 89 cents per share. The consensus view was 80 cents.
Despite Intel's restrained fourth-quarter forecast, Mr Pearson was "optimistic" about Europe. "A few months ago we didn't anticipate the strength we are seeing today," he said.
In the third quarter, Europe provided a boom reminiscent of the first half of the 1990s when Intel regularly experienced growth rates of 20 per cent or more. European revenue in the July-to-September quarter climbed 18.2 per cent to approximately $1.75 billion.
"Normally we have a summer slowdown but it never came in Europe. We were extremely surprised with the back-to-school growth," Mr Pearson said. In August, British retail sales rose 99 per cent month-on-month. In France, they were up 84 per cent.
The rise was driven in part by the arrival of Intel's high-speed Celeron processors for home computers. "Celeron was a slowstarter initially but since the introduction of the 300 and 333 megaherz parts we have seen wonderful acceptance."
Worldwide, Celeron shipments quadrupled in the third quarter from the second quarter, although high-priced Pentium II chips continue to make up "the bulk" of sales, Mr Pearson said. Pentium II processors now run at up to 450 megaherz.
In the US last week, Intel outlined plans to produce by 2001 a Pentium II successor, code-named Foster, running at 1,000 megaherz, or one gigaherz.
Foster would arrive as Intel adds an even brawnier chip, known as Merced, for high-end computers called servers and workstations.
Meanwhile, the company is trying to broaden its business, and spur demand by investing millions in small companies developing new Internet, multimedia, networking and chip technologies that require faster processors.
After reorganising into separate units producing server, corporate PC, consumer PC and portable PC chips, it plans to release its first processor for handheld computers and TV set-top boxes in the first half of 1999.
Intel also invested $65 million into about 25 companies in the third quarter. Its investments this year would be "substantially higher" than in 1997, when it plowed $350 million into about 100 companies, chief executive, Mr Craig Barrett said in Munich last month.
Mr Pearson said Intel hoped these efforts would return its growth rate to the high teens in the medium to long term. "We would be happy if we can continue at 15 to 18 per cent per year."
