Intel Sales Jump 18% on Demand for Laptops

Strong demand for laptop computers and growth in emerging markets boosted third-quarter sales at Intel Corp., but its shares slipped, partly on concerns that the chip giant might be unable to fill all its orders.

Santa Clara, Calif.-based Intel, which controls more than 80% of the microprocessor market, earned $2 billion, or 32 cents a share, up from $1.9 billion, or 30 cents, in the same quarter last year. Sales rose 18% to $10 billion.

The company also predicted strong sales in the current quarter and into next year.

But investors were wary. Intel’s stock gained 26 cents to $23.72 in regular trading, but fell to $22.95 in late trading after the earnings were released.

“This was a pretty solid quarter for them,” said Graham Tanaka, whose Tanaka Capital Management in New York holds 100,000 shares of Intel. He noted that sales in Asia rose 28% and that laptop sales worldwide accounted for a third of Intel’s revenue.

What worried him and some analysts more was that the company, which had an overabundance of chipsets last year, isn’t producing enough this year.

Intel has been unable to keep up with demand lately for basic sets of chips for personal computers. The company was focusing instead on the higher-growth laptop market where the margins are higher. “The problem was that Intel ran out of capacity,” Tanaka said.

That has allowed archrival Advanced Micro Devices Inc. to grab market share.

“Not meeting demand signifies that there’s a healthy demand out there, but not if it hurts you competitively and sends customers elsewhere,” said James D. Ragan, an analyst at Crowell, Weedon & Co., a Los Angeles-based brokerage. “You’re probably better off to have excess demand for a product.”

Intel Chief Executive Paul Otellini told analysts that the company was setting sales records in several countries, including China and India, two fast-growing markets for technology companies.

And executives were enthusiastic about new products, mainly smaller, faster chips and dual-core processors, which are two chips on a single piece of silicon. More than 1 million dual-core processors have been shipped already.

For the final three months, which include the usually hot-selling holiday season, Intel predicted that sales would range from $10.2 billion to $10.8 billion. Analysts, who on average had estimated revenue at $10.6 billion, weren’t enthused about the forecast.

The company is known for its conservative estimates, Tanaka said. But others aren’t so sure that’s the case now.

“We’d all like to believe Intel’s forecast is conservative, but I don’t think it behooves them to be conservative,” said Raymond James & Associates analyst Ashok Kumar. “I would argue they’re painting a realistic picture.”

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Reuters was used in compiling this report.