Top chipmaker Intel Corp posted earnings confirming the PC industry is alive — but not kicking — and said sales would accelerate in the second half of the year with a powerful new PC processor.
In a first-quarter earnings report that did not inspire investors to push Intel’s recently high-flying stock further, the company also said costs associated with ramping up new production lines would hurt gross margins more than expected.
The long-time technology bellwether is ramping up production of its newest PC processor, codenamed Ivy Bridge, which is expected to drive sales later this year and power a new crop of super-thin laptops called Ultrabooks.
However, the costs of upgrading the fabs where the chips are being made is temporarily hurting margins, chief financial officer Stacy Smith told a conference call.
That was bad news to Wall Street, which has pushed shares of Intel 17 percent higher so far this year.
Intel said gross margin in the second quarter would be 62 percent, plus or minus 2 percentage points, down from 64 percent in the first quarter. Intel’s full-year gross margin forecast of 64 percent was unchanged.
Shaky economies in Europe and the US, a growing consumer preference for tablets and a recent shortage of hard drives due to flooding in Thailand last year have taken a toll on the PC industry.
Demand in China and other emerging economies has helped sustain growth and Smith said business would pick up more as PC manufacturers replenish low component inventories.
“As we ramp Ivy Bridge and people gear up for these really capable Ultrabook sales in the last half of the year, you’ll start to see them refilling their pipelines with new products in the back half of this year,” Smith said.
Intel is heavily promoting Ultrabooks, which it hopes can stand up to the likes of Apple Inc’s Macbook Air.
Intel says manufacturers are finding ways to bring down costs of Ultrabooks, and chief executive Paul Otellini told analysts he was confident of the chipmaker’s previous prediction that the new light-weight PCs would account for 40 percent of all notebook sales by the end of the year.
“I’m still very confident we can do that. All the signs are tracking there. Everything we’ve looked at since we first gave that number has gotten more positive, more designs, better price points,” Otellini said.
Intel said revenue in the current quarter would be US$13.6 billion, plus or minus US$500 million. Analysts on average had expected US$13.45 billion, according to Thomson Reuters I/B/E/S.
The world’s leading chipmaker said revenue in the first quarter was US$12.9 billion, up from US$12.85 billion in the year-ago period and a bit higher than the US$12.85 billion expected.
Net income in the first quarter was US$2.74 billion, down from US$3.16 billion in the year-ago period. Earnings per share were US$0.53, better than the US$0.50 expected.