Intel Sees Quarterly Sales Beating Estimates on Company Computer Upgrades
Intel Corp. (INTC), the world’s biggest chipmaker, forecast third-quarter sales that exceeded some analysts’ estimates, bolstered by corporate computer upgrades and first-time purchases by consumers in emerging markets.
Revenue will be $14 billion, plus or minus $500 million, Intel said yesterday in a statement. That compares with $13.5 billion, the average of analysts’ projections compiled by Bloomberg. Gross margin, the percentage of sales left after deducting production costs, will be about 64 percent.
Corporate purchases of personal computers and servers, as well as sales to consumers in developing countries such as Brazil and China, are outweighing stagnant sales of laptops in the U.S. and Europe. Greater demand for Intel’s powerful chips for business machines and servers that run data centers has lifted average selling prices, boosting Intel’s profitability.
“We knew that there would be strength in the servers, but to see double-digit growth in their PC unit is great,” said Michael Shinnick, a South Bend, Indiana-based money manager at Wasatch Advisors Inc., which oversees about $10 billion in investments. Intel’s PC Client Group sales rose 11 percent in the second quarter to $8.3 billion.
Intel shares slid 18 cents to $22.81 at 4 p.m. New York time on the Nasdaq Stock Market. They have gained 8.5 percent this year.
Second-quarter net income rose to $2.95 billion, or 54 cents a share, from $2.89 billion, or 51 cents, a year earlier, the Santa Clara, California-based company said. Analysts on average had estimated profit of 51 cents. Sales increased 21 percent to a record $13 billion, compared with an average prediction of $12.8 billion.
Gross margin, the only measure of profitability that Intel forecasts, was 60.6 percent in the second quarter.
The technology industry needs one server computer for every 600 smartphones in use, and one for every 122 tablets, Intel Chief Executive Officer Paul Otellini told analysts in May. That means that even though Intel has so far failed to enter the mobile-phone processor business directly, it’s benefitting from rising demand for computer services provided over the Internet in the so-called cloud. Companies also need servers to handle a rising tide of high-definition video and other data over the Internet.
“The whole explosion of global devices and Internet services is driving significant growth for us,” Otellini said in an interview yesterday. “I don’t see it abating. As more and more of the Internet traffic moves to HD video, it’s going to drive more of that infrastructure.”
Intel’s data-center sales will jump to $10 billion this year, and they’ll double to $20 billion within five years, Otellini has predicted.
The company’s rosy forecast contrasted with disappointing reports on the broader PC market last week. On July 13, IDC said global PC shipments rose 2.6 percent in the second quarter, below the market-researcher’s projection for a 2.9 percent gain. U.S. shipments dropped 4.2 percent, IDC said. The same day, Gartner Inc. said worldwide PC sales increased 2.3 percent from a year earlier, compared with the 6.7 percent rise the firm predicted.
Intel’s processors run more than 80 percent of the world’s PCs. The company’s earnings have outperformed the industry so far this year because a greater portion of its sales come from emerging markets, which Intel says are harder for analysts to track when tallying total PC sales.
‘Low Double Digits’
The company expects the overall market for PC shipments to grow 8 percent to 10 percent this year, Otellini said yesterday. That’s down from an earlier forecast for percentage growth in the “low double digits.” Fewer units shipped won’t hold back the company’s revenue growth, as the potential shortfall will be in lower-end machines powered by Intel’s discount Atom range, he said.
Intel’s profit was helped by a lower tax rate in the second quarter. It paid 24.9 percent, compared with a prediction of 29 percent, because it got more profit in countries where the rates are lower, the company said.