Intel Profit Rises as Laptop Demand Climbs

Chip maker Intel Corp. said Tuesday that demand for laptops and continued growth in Asia helped boost second-quarter sales and earnings, although investors worried about slimmer-than-forecast profit margins.

The Santa Clara, Calif., company, whose chips power 80% of the world’s computers, also projected higher sales for the current quarter, driven in part by double-digit growth in China, India, South Korea and other rapidly growing Asian countries.

“This was a good second quarter, a period when business is typically slow,” Intel Chief Financial Officer Andy Bryant said during a conference call with analysts. “Demand is strong. Our factories are full.”

Net income for the three months ended July 2 was $2.04 billion, or 33 cents a share, up 16% from $1.76 billion, or 27 cents, a year earlier. The results beat analysts’ expectations by a penny, according to Thomson First Call.

Revenue was $9.2 billion, up 15% from a year earlier and in line with Wall Street estimates.

Strong laptop sales helped drive the company’s mobile-chip business, which posted sales of $3.15 billion, up 50%.

Sales to Asia, which accounted for 51% of Intel’s revenue in the quarter, grew 28%. In Europe, which accounted for 20% of the company’s revenue, sales grew 9%. Sales in North and South America, which make up one-fifth of overall revenue, fell 5%.

“Demand across all their segments is pretty strong, but most importantly in emerging markets, which has just been on a tear,” said Graham Tanaka of Tanaka Capital Management, which owns Intel shares.

Tanaka said Intel also benefited from the popularity of its more profitable Centrino wireless technology, which links computers to the Internet.

“Wireless has been an important differentiator for Intel,” he said.

However, Intel’s gross margin -- the percentage of gross profit realized on a dollar of sales -- was 56.4%, slightly below the 57% the company had targeted in April. The shortfall, which hurt Intel’s stock price, was partly due to an increase in sales of lower-margin chips for Microsoft Corp.’s Xbox console, said James Ragan, an analyst with Crowell, Weedon & Co. in Los Angeles who personally owns Intel shares.

Intel shares, which gained 48 cents to $28.71 in regular trading, fell to $27.45 in after-hours trading following the earnings announcement, a 4.4% decline. The shares have gained almost 30% since mid-April.

Analysts, however, took the company’s third-quarter outlook as a positive sign of industry growth. Intel projected sales of $9.6 billion to $10.2 billion and gross margins of 60%.

“The most important thing is guidance,” said Apjit Walia, an analyst with RBC Capital Markets. “And they guided significantly above estimates.”