Intel Corp reported better-than-expected revenue and margins for the fourth quarter and gave a rosy outlook for early this year, defying worries about the chipmaker’s minor role in the booming smartphone and tablet computer market.
Shares in the world’s largest chipmaker, whose net profit surged 48 percent year on year, gained 2.4 percent in after-hours trading after closing down marginally at US$21.29 on NASDAQ, driven by hopes for strong sales of its Sandy Bridge microprocessors, its newest and most advanced line.
“The expectation was there might be a miss. There is a lot of concern over smartphones and tablets, but that will take a backseat in the meantime,” said Mahesh Sanganeria, an analyst at RBC Capital Markets.
PHOTO: AFP
Despite an apparent early success with Sandy Bridge, Intel faces sluggish PC sales and a major challenge from the exploding popularity of mobile devices, a market dominated by Britain’s ARM Holdings.
Intel’s processors are the brains in 80 percent of the world’s PCs, but the company has yet to make its mark in mobile gadgets that people increasingly depend on to surf the Web and update their social-networking profiles.
“Right now there’s just a larger overhang over the stock when it comes to tablets and smartphones. That may be an area where investors are more cautious,” said Patrick Wang, an analyst at Wedbush Securities.
But for the shorter term, many investors are betting on a bump in revenue growth from the chip giant’s newest product line, considered one of its most important advances in computer processing power. Intel unveiled its Sandy Bridge microchip last week.
“It seems to be getting widespread acceptance from the customers. Even with the consumer market being a little bit weak ,we expect it to ramp sales nicely in Q1,” Intel chief financial officer Stacy Smith said.
Intel executives also said they were almost doubling capital spending this year to US$9 billion, plus or minus US$300 million. It is building a new fabrication plant in Oregon and upgrading several existing factories to manufacture its next-generation 22-nanometer microprocessors.
Intel posted an 8 percent increase in fourth-quarter revenue and forecast revenue of US$11.1 billion to US$11.9 billion in the first three months of this year.
The fourth-quarter revenue slightly exceeded the US$11.37 billion expected by analysts, according to Thomson Reuters I/B/E/S. Analysts, on average, forecast revenue of US$10.73 billion in the first three months of this year.
Intel had a record gross margin of 67.5 percent in the fourth quarter, compared with the 66.7 percent expected by analysts.
It forecast a gross margin of 64 percent in the current quarter, plus or minus 2 percentage points. Analysts forecast a first-quarter gross margin of 63.5 percent.
Intel said net income totaled US$3.4 billion, or US$0.59 a share, in the fourth quarter, compared with US$0.53 per share expected by analysts.
Major technology companies are expected to keep up sales and profit growth this year, but economic troubles in the US and Europe could temper their results.
Intel, however, also faces the unique challenges of safeguarding its 80-percent-plus market share in an evolving environment where consumers are choosing mobility and connectivity over processing power.
Apple Inc’s iPad and other tablets, powered by ARM-based architectures, consume less power and their longer battery life is winning over users. Some analysts foresee the imminent end of the PC era.
Intel CEO Paul Otellini told analysts on a conference call to watch out for improved versions of Intel’s Atom mobile chips in a wide array of tablets this year.
“You will also see Atom processors appear in smartphones, operating at very competitive power levels with performance that will lead the industry,” Otellini said.
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