Intel, the world's largest computer chip maker, reported strong demand for its products on Tuesday, a day after a main Silicon Valley rival, Advanced Micro Devices (AMD), warned that it expected to report lower profits because of a price war with Intel in the flash memory market.
Intel said that its revenue was up nearly 10 percent in the fourth quarter, to US$9.6 billion, while its profit dipped slightly, to US$2.1 billion, or US$0.33 a share, compared with US$2.2 billion, also US$0.33, in the quarter a year earlier.
At the same time, it gave an upbeat forecast for the coming year, suggesting that the company was making progress in overcoming some of its production problems and excessive inventories arising from troubles matching supply with demand.
The chief financial officer, Andy Bryant, said that "2004 was a year of growth for Intel," attributing the strength of its product line to a successful holiday selling season for computers and digital devices as well as a continued expansion of spending by corporations.
Intel's earnings report is considered a leading indicator of the health of the technology sector but it also appeared to reflect a comeback of sorts in the company's battle with AMD, which has made substantial inroads into Intel's dominant position as the leading microprocessor maker.
Intel has fought back in part by challenging AMD in its own critical stronghold -- producing a variety of chips known as flash memory that are used in cellphones and other portable digital devices.
Paul Otellini, Intel's president, said the company was particularly benefiting from robust spending on all types of digital products as innovation in the technology business is increasingly being energized as much by consumer demand as by corporate spending.
"What gave Q4 a nice boost was the retail business," he said.
Intel executives said the company expected to increase capital spending by at least US$1 billion this year, as it moves toward so-called dual core processors that are intended to offer better performance than today's chips.
Spending on research and development will increase to US$5.2 billion from US$4.8 billion, Bryant said, the highest level in Intel's history. Intel executives said gross profit margins were 56 percent in the fourth quarter, a sharp decline from 63.6 percent a year earlier. Intel attributed the decline to increased competition from AMD, leading it to reduce prices.
AMD said on Monday that its operating income for the fourth quarter would be lower than it said last month. While it projected that sales would be up "slightly," ana-lysts had expected them to rise as much as 9 percent from the third quarter.
Advanced Micro attributed its problems to competitive conditions in the market for flash memory chips. Analysts said that its loss in the fourth quarter was Intel's gain.
For all of last year, Intel's revenue was US$34.2 billion, surpassing its record of US$33.7 billion in 2000. Net income for the year was US$7.5 billion, up 33 percent from 2003. Earnings were US$1.16 a share, a 36 percent improvement over last year.
Looking ahead, Intel projected revenue at US$8.8 billion to US$9.4 billion this quarter.