Wednesday, July 15, 2009

Intel Gives Upbeat Outlook as Sales Revive

Chip Giant Posts Quarterly Loss After EU Fine but Sees Improving Demand for PCs; 'A Nice Tailwind By DON CLARK Intel Corp. provided fresh evidence that PC sales are rebounding for some vendors, though the company's second-quarter results were marred by a rare loss due to a $1.45 billion antitrust fine. The Silicon Valley chip giant posted revenue and profit margins for the period ended June 29 that were much stronger than the first quarter. "While the global economic environment is still recovering, our customers signaled increased confidence" with their ordering patterns, said Intel Chief Executive Paul Otellini during a conference call Tuesday. Digits Live-Blogging Intel's Earnings Call Intel projected that revenue would expand further in the current period, with additional improvements in profit margins. The company's stock jumped 7% in after-hours trading following the news to $18.02. It finished the 4 p.m. Nasdaq Stock Market session at $16.83. "These results really do show that the worst is behind for Intel," said Doug Freedman, an analyst at Broadpoint AmTech. The company declared in April that the PC market had bottomed out, and suggested that revenue would be flat with the $7.1 billion reported in the first period. Analysts were expecting slightly better than that. Instead, Intel reported second-quarter revenue of $8.02 billion, up 13% from the first quarter though still 15% below year-earlier levels. The improvement in profitability was more dramatic; Intel in April projected a gross margin percentage for the second quarter in the "mid-40s," but Tuesday reported 50.8%. The company's remarks contrast sharply with those of Dell Inc., which is second to Hewlett-Packard Co. in global PC sales. Dell on Monday projected shrinking profit margins, and on Tuesday told analysts that companies continue to put off technology purchases. But Intel's sales lately have been much more closely tied to spending by consumers -- particularly for laptop computers -- while most of Dell's sales go to businesses. Mr. Otellini said Intel had a strong rebound in shipments of microprocessors for laptop computers, though he said sales of chips for server systems also were surprisingly strong because of demand spurred by a new chip family dubbed Nehalem, which offers a big leap in computing performance. Stacy Smith, Intel's chief financial officer, added that the company reduced inventories and headcount. "We have a nice tailwind going into the third quarter," he said in an interview. Not that all is rosy. Intel, which helped push for inexpensive laptops called netbooks, faces analyst fears that the low-priced chip called Atom used in those products will steal sales from more profitable products. Intel said that its average sales prices declined from the first quarter, even excluding Atom. Then there is the fine from the European Union, which in May found that the company had abused its dominant position in competing against Advanced Micro Devices Inc. Because of the fine, Intel swung to a loss of $398 million, or seven cents a share, from a profit in the year-earlier period of $1.6 billion, or 28 cents a share. Intel, which is appealing the EU ruling, had not posted a quarterly loss since the mid-1980s. Write to Don Clark at

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