Intel’s Earnings Double in Quarter
Intel Corp., the world’s biggest manufacturer of semiconductors, said Tuesday that second-quarter profit more than doubled thanks to strong sales of microprocessors for personal computers and growth in emerging markets.
Santa Clara, Calif.-based Intel earned $896 million, or 14 cents a share, 1 cent more than the consensus of Wall Street analysts according to Thomson First Call. Sales in the quarter were $6.82 billion.
Profit was just more than twice the $446 million, or 7 cents a share, that Intel earned in the second quarter of last year, on revenue of $6.32 billion.
“Overall, the quarter came in slightly better than we expected led by good demand in our computing-related business, which posted solid year-over-year results,” said Chief Executive Craig Barrett.
For the third quarter Intel expects revenue of $6.9 billion to $7.5 billion, Chief Financial Officer Andy Bryant said in a conference call with industry analysts.
“The Street was expecting $7.1 billion, so that’s a good thing,” said Graham Tanaka of Tanaka Capital Management, which manages about $120 million in assets and owns somewhat less than 100,000 Intel shares.
Intel said it expected gross margins to be 54% in the third quarter, up from 50.9% in the second quarter.
“That’s pretty doggone good,” Tanaka said. “They’re getting more revenue, with higher margins, and lower start-up costs which means they’re well into the sweet spot of Pentium 4 and mobile chips.”
The results, which were announced after the markets closed, sent Intel shares up to $25.70 in extended trading. In regular Nasdaq trading Tuesday, the stock rose 8 cents to close at $24.10.
Computer chip sales were strong in emerging markets, especially the Asia-Pacific region, President and Chief Operating Officer Paul Otellini said in the conference call. Revenue from Asia-Pacific was $2.8 billion, or 41% of Intel’s overall sales, Otellini said.
“Asia-Pacific set an all-time revenue record, which included a small impact from SARS,” Otellini said, referring to severe acute respiratory syndrome, the illness that disrupted the economies of several Asian countries.
But Intel saw revenue fall in flash memory, chips that retain information when devices are turned off. Intel’s Wireless Communications & Computing Group, which includes flash memory along with chip products for cellular phones and hand-held devices, took in $465 million in the second quarter, down 13% from $536 million in the same period a year ago.
Demand for flash memory is likely to increase with the growing popularity of mobile phones that can take photographs, Otellini said.
Spending on research and development this year will be about $4.2 billion, higher than the $4 billion Intel previously estimated, the company said. The increase is largely due to a change in chip production to a process that builds chips closer to each other on silicon wafers.
