Intel Forecasts Revenue That May Exceed Estimates

Intel Corp., the world’s biggest chipmaker, predicted fourth-quarter sales that may be more than analysts’ estimates, helped by demand in emerging economies.

Revenue will range from $11 billion to $11.8 billion, Santa Clara, California-based Intel said yesterday in a statement. That compares with the average analyst projection of $11.3 billion, according to data compiled by Bloomberg.

Corporations and households in less developed markets bought more computers, helping Intel weather slumping demand among consumers in the U.S. and Europe, Intel Chief Financial Officer Stacy Smith said in an interview. The outlook bodes well for computer makers, including Dell Inc. and Hewlett-Packard Co., which benefit when businesses upgrade dated machines.

“It’s reassuring that things aren’t declining dramatically,” said Michael Shinnick, a fund manager at Wasatch Advisors Inc. in South Bend, Indiana. His company owns Intel shares as part of the $8.5 billion in assets it manages. “Corporate spend is quite strong, but there is some softness on the consumer side.”

The last four weeks of the third quarter were better than the company predicted, Smith said on a call with analysts. The improvement in demand was the basis for the company’s predictions for this period. Component inventory remains “lean” throughout the computer supply chain, he said.

No Double Dip

Chief Executive Officer Paul Otellini said the PC industry is still on course to grow 18 percent this year. He doesn’t anticipate a double-dip recession and sees 2011 as being a “pretty good” year for computer sales.

Intel fell 53 cents to $19.24 at 4 p.m. New York time in Nasdaq Stock Market trading. The shares have lost 5.7 percent this year.

Third-quarter net income rose 59 percent to $2.96 billion, or 52 cents a share, from $1.86 billion, or 33 cents, a year earlier. Analysts had estimated a profit of 50 cents a share. Revenue increased 18 percent to $11.1 billion, compared with an average prediction of $11 billion.

Gross margin, the only profit indicator that Intel forecasts, will be about 67 percent this quarter, within “a couple” of percentage points, the company said. The margin -- the percentage of sales remaining after deducting production costs -- was 66 percent in the third quarter.

Consumer Weakness

“It’s clearly a positive for those companies in the PC and enterprise space,” said Pat Becker Jr. of Becker Capital Management Inc. in Portland, Oregon. The company owns shares of Intel as part of the $2.2 billion it oversees. “The margins in that help overcome some of the weakness we’ve seen in the consumer in August.”

In August, when Intel revised projections, it said gross margins wouldn’t reach the high end of an earlier forecast, coming in at 65 percent to 67 percent. At the time, Intel said third-quarter results would be less than expected, citing weaker consumer demand for personal computers in mature markets.

“We saw demand strength in emerging markets and the enterprise segment of the market,” Smith said in the interview. “It was offset by consumer demand in developed markets being a little less than we thought when we started the quarter.”

Otellini played down the threat posed by Apple Inc.’s iPad and other tablet computers that don’t feature Intel chips. Tablet sales won’t undermine PC demand, and Intel is winning contracts to get its chips into the devices, he said.

“You’re dealing with numbers that are relatively small,” Otellini said. “It gets to be a factor, but a secondary factor.”

Intel, whose chips run more than 80 percent of the world’s personal computers, kicks off three weeks of earnings reports by the largest U.S. technology companies, including International Business Machines Corp., Google Inc. and Microsoft Corp.

The company -- which agreed to buy McAfee Inc. for $7.68 billion last quarter, its biggest acquisition -- isn’t considering another “large” purchase right now, Smith said.

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