Home / World Business
Thu, Jul 15, 2010 - Page 10 News List

Intel Corp sets bright tone for earnings

UPSWINGThe chipmaker expects a record margin of 67 percent in the third quarter and says it expects firms to begin upgrading their computers as economies pick up

REUTERS AND AP , SAN FRANCISCO AND THE HAGUE, NETHERLANDS

Resilient demand for PCs and servers helped Intel Corp’s margin and revenue forecasts blast past Wall Street expectations, allaying fears of a technology spending slowdown and sending its shares up nearly 8 percent.

The company posted net income of US$2.9 billion, or US$0.51 a share, versus a net loss of US$398 million, or US$0.7 a share, in the second quarter of last year. Analysts had expected earnings of 43 cents per share in the second quarter.

Revenue in the quarter ended June 26 was US$10.8 billion, above the US$10.25 billion expected, according to Thomson Reuters I/B/E/S. And its gross profit margin in the second quarter was 67 percent, exceeding the 64 percent expected by analysts.

Intel’s stellar results set an upbeat tone for the industry’s earnings season and the world’s top chipmaker expects a record gross margin of 67 percent for the third quarter, give or take a couple percentage points.

It foresees revenue of US$11.2 billion to US$12 billion, surpassing analysts’ target of US$10.9 billion.

“Demand was stronger than many people anticipated. The Street was concerned corporate spending would be restrained with what’s happened in Europe, and that wasn’t the case,” said John Massey, portfolio manager at Sun America Asset Management.

“The real thing that got the Street going was the gross margin guidance, which they raised. It shows a lot of confidence that the company has for the back half of the year. If the company was at all concerned about demand, you wouldn’t have expected them to raise that number,” he said.

Intel executives said there are clear signs of renewed spending by corporations.

“Now that corporations have some breathing room in the economy and their budgets, you’re starting to see those machines that were four or five years-old get refreshed,” Intel CEO Paul Otellini said in a conference call with analysts.

Otellini added channel inventory remained “lean,” and the company is comfortable with rising internal inventories.

Gleacher&Co analyst Doug Freedman said new products in Intel’s data center group, which makes chips for servers used by corporations, provided a big lift to Intel’s top line.

“I’d expect that the enterprise market continues to be strong into the third quarter,” CFO Stacy Smith said.

Intel has high hopes for the launch of its Sandy Bridge processor later this year. Smith said Intel expects to move up more of its capital expenditures into this year from next year, to prepare for that ramp-up.

Shares in Intel rose 7.1 percent to US$22.50 in extended trade. Microsoft Corp and Cisco Systems Inc rose about 2 percent after-hours. Intel’s arch-foe, Advanced Micro Devices Inc, climbed 5 percent. And Texas Instruments Inc climbed 1.8 percent.

In Asia, investors chased shares of major technology companies following Intel’s upbeat forecasts. Taiwan’s Acer Inc (宏碁), the world’s No. 2 PC vendor, shot up 6 percent while its Chinese rival Lenovo Group Ltd (聯想) gained 4.8 percent. Both stocks hit three-week highs.

“We have more confidence in the tech sector’s recovery now,” said Tom Tang, analyst at Masterlink Investment Advisory (元富證券) in Taipei. “It looks like inventory is healthy and won’t be a problem in the third quarter.”

Apart from Acer and Lenovo, top contract chipmaker Taiwan Semiconductor Manufacturing Co (台積電) also rose 1.7 percent and South Korea’s Samsung Electronics Co, the world’s largest maker of memory chips and displays, jumped 3.4 percent.

This story has been viewed 1891 times.

Comments will be moderated. Keep comments relevant to the article. Remarks containing abusive and obscene language, personal attacks of any kind or promotion will be removed and the user banned. Final decision will be at the discretion of the Taipei Times.

TOP top