Intel Beats Estimates by a Gigabyte
Intel Corp., in the sort of welcome surprise for which it is becoming renowned, on Monday announced third-quarter profit handily surpassing Wall Street’s most sanguine estimates.
The announcement, coming after the market’s close, sent the semiconductor giant’s stock soaring in after-hours trading. Intel shares, which had risen $2.25 to close at $107.625 in the day’s trading before the announcement, shot up $6.875 to a record $114.50 after the market’s close. After-hours activity is often a good indication of how a stock will open the following day.
Intel’s earnings of $1.3 billion, or $1.48 per share, on revenue of $5.14 billion in the quarter ended Sept. 30 exceeded Wall Street’s consensus estimate by 23 cents a share.
The quarterly revenue figure represented a 23% rise over the $4.17 billion posted in the corresponding quarter last year, as well as the first time Intel has exceeded $5 billion in revenue in a quarter.
The quarter’s profit was 41% higher than that in the same period last year, aided by an increase in gross margins, to 57.2% from the 53.5% in the second quarter of this year. That is a reflection of strong demand for Intel’s highest-performance microprocessors, on which the company earns a proportionately higher profit.
“Intel even surprised itself,” said Robert Chaplinsky, semiconductor analyst for San Francisco investment bank Hambrecht & Quist.
Added Dan Niles, a semiconductor analyst with Robertson Stephens: “They’ve beat the heck out of my wildest-dreams estimate.”
Despite the company’s buoyant earnings, Intel executives were uncharacteristically silent on the firm’s prospects for the fourth quarter. The company said it was shying away from projections out of fear of Proposition 211, a securities litigation reform measure on California’s November ballot. Intel executives said any statements regarding future earnings might subject them to securities fraud lawsuits if the company then failed to meet expectations.
Sponsored by a consortium of trial lawyers, Proposition 211 would make it easier to sue companies in state court for securities fraud.
Intel’s overall results had many industry analysts proclaiming an end to the nearly yearlong slump in personal computer sales.
Intel has a near-monopoly in microprocessors, the engine of the personal computer. The company has found itself scrambling to meet demand for ultra-fast versions of its popular Pentium microprocessor, analysts said.
Analysts are now scrambling to revise their estimates for Intel’s fourth quarter, which ends Dec. 31. Most had projected profit of $1.30 per share. It is likely that will be upgraded to $1.50 and higher.
“There is going to be Christmas this year and Santa Claus is going to buy a lot of PCs,” said Niles of Robertson Stephens.
He said industry analysts were caught short by Intel’s results because they overestimated the depth of the PC sales slump. “The problem has been that we stayed optimistic for too long and then we stayed pessimistic for too long,” he said. “The PC market is not dead.”
