Intel Tops Analysts' Estimates, Says Recovery Has Legs
Paul Otellini, chief executive officer of Intel Corp., speaks at the Innovation Economy Conference in Washington, D.C. Photographer: Andrew Harrer/Bloomberg
July 14 (Bloomberg) -- Intel Corp. Chief Financial Officer Stacy Smith talks with Bloomberg's Susan Li from Santa Clara, California, about the outlook for sales. Intel, the world's biggest chipmaker, reported record second-quarter sales and topped analysts' estimates with its forecast for this period, allaying concern that a rebound in technology spending is losing steam. Smith also discusses the company's investments in China. (Source: Bloomberg)
Intel Corp., the world’s biggest chipmaker, reported record second-quarter sales and topped analysts’ estimates with its forecast for this period, allaying concern that a rebound in technology spending is losing steam.
Third-quarter sales will be $11.6 billion, plus or minus $400 million, the Santa Clara, California-based company said today in a statement. Analysts had estimated $10.9 billion on average, according to a Bloomberg survey.
Intel, the first big technology company to report second- quarter earnings, renewed optimism that the industry will avoid getting mired in another slump. Reporting its third straight quarter of sales growth after last year’s contraction, Intel said corporate spending is strengthening, signaling that the economy isn’t headed back into recession.
“This takes your probability for a double-dip way down,” said Keith Goddard, president of Tulsa, Oklahoma-based Capital Advisors Inc., which owns Intel stock as part of $800 million in assets under management. “There are collateral positives for the whole tech space.”
Intel jumped $1.13, or 5.4 percent, to $22.14 in extended trading. The stock, which has climbed 3 percent this year, had closed at $21.01 in regular Nasdaq Stock Market trading.
Second Quarter
Second-quarter net income was $2.89 billion, or 51 cents a share, compared with a loss of $398 million, or 7 cents, a year earlier, when Intel paid a European Union fine. Analysts estimated a profit of 43 cents a share.
The report followed better-than-anticipated earnings from Alcoa Inc. and an increased forecast for aluminum consumption -- further evidence that the economic recovery has staying power. The Standard & Poor’s 500 Index rose 1.5 percent today, extending its longest rally in three months, and the Stoxx Europe 600 Index surged 1.9 percent. All 10 industries in the S&P 500 advanced.
Intel’s forecast boosted shares of rival Advanced Micro Devices Inc., which rose 5.7 percent to $7.95 in late trading. Microsoft Corp., the world’s largest software maker, climbed 2.3 percent to $25.70.
Revenue increased 34 percent to $10.8 billion last quarter, compared with an average estimate of $10.3 billion.
Margin Forecast
Intel lifted its forecast for gross margin -- the percentage of sales remaining after deducting production costs -- to 66 percent for the year, from a previous prediction of 64 percent. For the current period, the margin will be 67 percent, the company said.
Corporations continue spending on PCs and servers, Chief Financial Officer Stacy Smith said. He also indicated that customers haven’t built up excessive chip stockpiles, a concern among investors before the earnings report.
“We saw a resurgence of the enterprise market,” he said in an interview. “We see inventory levels that are healthy.”
The company kicks off three weeks of earnings reports by the largest U.S. technology companies, including International Business Machines Corp., Google Inc. and Microsoft Corp. Intel’s dominance of the market for microprocessors, the main component in computers, makes its sales a barometer of industry demand.
Chief Executive Officer Paul Otellini expects the PC market to rise as much as 16 percent annually through 2014, helping maintain Intel’s sales gains. Analysts have taken a different view. They estimate that Intel’s revenue growth will slow to 6 percent next year and 1 percent in 2012, according to the Bloomberg survey.
Intel also is predicting wider profit margins for the longer run. Smith has said he expects the gross margin to range between 55 percent and 65 percent in coming years. That compares with 50 percent to 60 percent over the past decade.
To contact the reporter on this story: Ian King in San Francisco at ianking@bloomberg.net
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