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Intel Forecasts Revenue That May Exceed Analysts’ Estimates

A silicon wafer sits on display at the Intel Corp. booth at the International Consumer Electronics Show (CES) in Las Vegas. Photographer: David Paul Morris/Bloomberg
A silicon wafer sits on display at the Intel Corp. booth at the International Consumer Electronics Show (CES) in Las Vegas. Photographer: David Paul Morris/Bloomberg

Jan. 19 (Bloomberg) -- Intel Corp., the world’s largest chipmaker, predicted first-quarter revenue that may top analysts’ estimates, signaling that the shortage of disk drives that throttled personal computer production may be ending.

Sales in the current period will be $12.8 billion, plus or minus $500 million, Santa Clara, California-based Intel said in a statement today. Analysts had predicted revenue of $12.8 billion, the average of estimates in a Bloomberg survey. Sales a year earlier were $12.8 billion.

Production is bouncing back after the worst flooding in 7 decades in Thailand impeded computer manufacturing last year and prompted Intel to trim its fourth-quarter sales forecast in December. The company also benefited as businesses bought more servers to outfit data centers and consumers in emerging markets flocked to PCs. Those trends made up for weakness stemming from Europe’s credit crisis.

“The strength in servers is just awesome, and in the emerging markets you’re seeing really healthy double digit growth of PCs.” said Michael Shinnick, a fund manager at South Bend, Indiana-based Wasatch Advisors Inc. His firm owns Intel shares. “The key thing is that Europe is not declining or causing problems to the extent that the macro headlines might have led some to believe.”

2012 Sales Outlook

Sales will increase at a “high single-digit” percentage rate this year amid consumer demand in less-developed economies and buying by corporations, Intel Chief Financial Officer Stacy Smith said in an interview with Bloomberg Television. While there is growth, it’s still below what would be normal for this time of year, and shortages of hard disks will continue to cut into orders for other computer parts this quarter, he said.

“We will certainly see higher growth levels in the emerging markets,” Smith said. “It’s a continuation of what we have seen to date -- strong in emerging markets, stronger in the data center, driven by the cloud. The mature market consumer is likely to be sluggish, based on macroeconomic concerns.”

Shares advanced to as high as $26.25 in late trading, after adding less than 1 percent to $25.63 at the close in New York. That left the shares up 5.7 percent this year.

Investors regard Intel’s earnings as a harbinger of demand for desktops, servers and laptop computers. Advanced Micro Devices Inc., Intel’s main competitor in computer microprocessors, is scheduled to report fourth-quarter performance next week.

Margin Outlook

For the fourth quarter, Intel said profit rose to $3.36 billion, or 64 cents a share, from $3.18 billion, or 56 cents a share, a year earlier. Sales rose 21 percent to $13.9 billion. Intel cut its first-quarter revenue forecast in December, by about a $1 billion to $13.7 billion, plus or minus $300 million.

Gross margin, or the percentage of sales remaining after deducting costs of production, will be about 63 percent in the first quarter, Intel said. Analysts were predicting, on average, 62.4 percent. For 2012, gross margin will be about 64 percent, Intel said.

Capital spending will be $12.5 billion this year, plus or minus $400 million, Intel said, indicating an increase from last year’s $10.8 billion.

Intel’s biggest customers are Hewlett-Packard Co., Dell Inc. and Quanta Computer Inc., according to a Bloomberg supply-chain analysis.

Intel may be making headway in efforts to broaden beyond traditional computers. The company said earlier this month that Lenovo Group Ltd. and Motorola Mobility Holding Inc. plan to make mobile phones based on Intel processors, gaining a foothold in a market dominated by such rivals as Qualcomm Inc.

A Lenovo handset will go on sale in the first half, followed by products from Motorola Mobility in the second part of the year, Chief Executive Officer Paul Otellini said at the Consumer Electronics Show.

Still, the early moves in mobile aren’t “going to move the needle for me this year,” Intel’s Smith said of revenue growth. “You’ll see us to continue to win designs throughout the year.”

To contact the reporter on this story: Ian King in San Francisco at ianking@bloomberg.net

To contact the editor responsible for this story: Tom Giles at tgiles5@bloomberg.net

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