Intel profit up 25%, beating estimates
Intel Corp.’s second-quarter profit jumped 25% as blossoming sales of laptop chips helped the company cruise past Wall Street’s estimates Tuesday.
Investors viewed the chip maker’s favorable results as a sign that global PC demand is healthy despite a sputtering U.S. economy that has depressed some domestic spending. Intel Chief Executive Paul Otellini said demand for Intel’s chips remained strong “in all segments and all parts of the globe.” Three-quarters of Intel’s business is outside the U.S.
Intel shares rose 23 cents, or 1.1%, to $20.94 in after-hours trading. They had risen 24 cents, or 1.2%, to $20.71 in the regular session before the Santa Clara, Calif.-based company reported its results.
Intel said its net income was $1.6 billion, or 28 cents a share, in the three-month period ended June 28.
That was 3 cents a share higher than what analysts surveyed by Thomson Financial were expecting. It was a 25% jump from the $1.28 billion, or 22 cents a share, that Intel earned a year earlier.
Intel is profiting from surging global demand for laptops and the processors that power them, though lower prices for some of the fastest-growing models drove down Intel’s closely watched average selling price in the latest quarter.
However, Intel can absorb the trend easier than smaller rival Advanced Micro Devices Inc. because Intel has made a faster switch to a new manufacturing process that lowers the cost of making each chip.
Intel is the world’s No. 1 supplier of microprocessors, the electronic brains of personal computers. Intel commands about 80% of the market, with AMD owning roughly the other 20%.
Intel has been taking market share from AMD in recent quarters with a more robust product lineup. Meanwhile, AMD has been hurt by lengthy product delays and the substantial debt it took on to finance its $5.6-billion acquisition of graphics chip maker ATI Technologies, a deal done to bolster AMD’s competitiveness in graphics.
Intel was hurt in the second quarter by its investment in a type of memory called NOR flash, which is widely used in cellphones but isn’t as popular as another type of memory called NAND flash and used in gadgets such as iPods and digital cameras. Intel said its revenue from NOR flash was “significantly lower” in the latest quarter.
Intel’s sales set a record at $9.5 billion, up 9% over last year and $150 million higher than analysts’ forecasts.
Some analysts’ expectations were subdued on fears about whether Intel’s core business would be hurt by the ailing U.S. economy. They could be reassured that Intel’s sales forecast for the current quarter was in line with Wall Street’s predictions.
Intel is projecting $10 billion to $10.6 billion in sales for the third quarter.
Part of Intel’s improving finances can be traced to aggressive head count reductions.
Intel finished the second quarter with fewer than 82,000 employees. That’s about 20,000 fewer workers than Intel had two years ago, when intense competition from AMD forced Intel to slash costs to reverse steadily sinking profit. Intel’s cuts have come from layoffs, attrition and the divestiture of ancillary businesses.
The pendulum has now swung against Sunnyvale, Calif.-based AMD, which has racked up more than $4 billion in losses over the last six quarters and is cutting 1,600 workers, or 10% of its global workforce.
