Intel’s profit jumps as computer sales rebound

Intel Corp. said Thursday that its fourth-quarter profit ballooned as a strong rebound in the personal computer market overcame a hefty payment Intel made to its biggest rival.

Intel also said its revenue and profit margin in the current quarter could be better than what analysts were expecting, and its shares rose in extended trading.

Computer shipments grew more sharply than expected in the fourth quarter after the recession led to a brutal year for the industry. With Intel supplying the vast majority of PC microprocessors, the company generated net income of $2.3 billion, or 40 cents a share. That was more than nine times as much as it earned a year earlier, when profit totaled $234 million, or 4 cents.

Sales climbed 29% to $10.6 billion. Intel pegged the increase to brisker PC chip sales. It also said average prices for chips destined for server computers were higher than a year ago.

Analysts expected a profit of 30 cents a share on $10.2 billion in revenue, according to Thomson Reuters.

Intel’s gross profit margin was 64.7% of revenue -- its best ever, the company said. A higher gross margin number means Intel was able to turn more revenue into profit.

Gross margin is a key measure for a manufacturing-intensive company because it reflects how well the company is controlling costs.

Intel shares, which climbed 2.5%, or 52 cents, in regular trading Thursday to $21.48, rose 1.8% in after-hours trading to $21.87.

Intel is the first major technology company to report its results for the fourth quarter. The company is seen as a barometer for the PC market and technology spending in general.

“We’re predicting that 2010 is a year of robust unit growth,” Stacy Smith, Intel’s chief financial officer, said in an interview. “I think it’s continued strength in the consumer segment.”

Smith said that Intel had not yet seen signs that big companies were feeling freer to replace their old PCs, but that he expects it to happen this year.

Intel issued an optimistic sign by saying that in the current quarter, it expects revenue of $9.3 billion to $10.1 billion, and a gross profit margin of 59% to 63%.

Analysts had been predicting first-quarter revenue of $9.3 billion and a gross margin of 59%.

In the last quarter, Intel paid $1.25 billion to settle antitrust charges brought by Silicon Valley rival Advanced Micro Devices Inc., the world’s No. 2 maker of microprocessors. That cut 22 cents from Intel’s bottom line. The company also had said, however, that the payment would lower its tax rate because legal settlements are tax deductible.

In the same period a year earlier, Intel’s earnings were hurt by a $1-billion charge for a reduction of the value of its investment in wireless networking company Clearwire Corp. That sliced 17 cents from the company’s profit.

Intel’s full-year earnings fell 21% to $4.4 billion, or 77 cents a share, from $5.3 billion, or 92 cents.

Revenue slipped 7% to $35.1 billion from $37.6 billion.

Analysts were looking for earnings of 67 cents on $35.1 billion in revenue.

Mintz writes for the Associated Press.