In­tel posts biggest quar­terly profit in a decade

Austin American-Statesman - - BUSINESS & PERSONAL FINANCE - By Jor­dan Robert­son

SAN FRAN­CISCO — In­tel Corp. booked its largest quar­terly net in­come in a decade as the chip­maker ben­e­fited from a stronger com­puter mar­ket and more so­phis­ti­cated fac­to­ries.

Large cor­po­ra­tions bought more com­put­ers that use In­tel’s most ex- pen­sive chips, an en­cour­ag­ing sign for the econ­omy that emerged from In­tel’s sec­ond-quar­ter num­bers, re­ported Tues­day af­ter the stock mar­ket closed. Cor­po­ra­tions have been stingy on up­grad­ing per­sonal com­put­ers, a trend In­tel is now see­ing re­verse. In­tel gets most of its profit from sell­ing chips for PCs.

In­tel CEO Paul Otellini said com­pa­nies are start­ing to re­place 4-and 5-year-old PCs now that they have some “breath­ing room in the econ­omy and their bud­gets.” In­tel has unique in­sight be­cause it owns 80 per­cent of the world­wide mar­ket for mi­cro­pro­ces­sors, the brains of PCs and servers.

In­tel’s re­port re­newed op­ti­mism that the PC in­dus­try will avoid get­ting mired in an­other slump. In­tel said cor­po­rate spend­ing is strength- en­ing, sig­nal­ing the econ­omy isn’t headed back into re­ces­sion.

“This takes your prob­a­bil­ity for a dou­ble-dip way down,” said Keith God­dard, pres­i­dent of Cap­i­tal Ad­vi­sors Inc. in Tulsa, Okla.

The num­bers of­fer fur­ther ev­i­dence that com­pa­nies are free­ing up their technology bud­gets, which

should help other technology com­pa­nies. In­tel’s main ri­val, Austin-based Ad­vanced Mi­cro De­vices Inc., re­ports its quar­terly re­sults on Thurs­day; IBM Corp. and Mi­crosoft Corp. are due next week.

In­tel’s re­sults topped Wall Street’s fore­casts, and the com­pany raised its guid­ance. Its shares rose more than 7 per­cent in ex­tended trad­ing to about $22.50.

In­tel’s net in­come was $2.9 bil­lion, or 51 cents per share, in the quar­ter that ended June 26. An­a­lysts ex­pected 43 cents per share. The last time In­tel’s quar­terly net in­come topped $2.5 bil­lion was in 2000 dur­ing the dot-com hey­day, when In­ter­net fever fu­eled spec­tac­u­lar com­puter sales.

In the year-ago pe­riod, In­tel lost $398 mil­lion, or 7 cents per share, when it paid a $1.5 bil­lion fine in Europe over an­titrust vi­o­la­tions.

Rev­enue was $10.8 bil­lion in the lat­est pe­riod, above the $10.25 bil­lion ex­pected by an­a­lysts sur­veyed by Thom­son Reuters.

In­tel’s third-quar­ter fore­cast was stronger than ex­pected: rev­enue of $11.2 bil­lion to $12 bil­lion. An­a­lysts were pro­ject­ing $10.9 bil­lion.

In­tel now ex­pects gross profit mar­gin — a key mea­sure of a com­pany’s abil­ity to con­trol costs — of 64 per­cent to 68 per­cent of rev­enue. Its pre­vi­ous fore­cast was for 62 per­cent to 66 per­cent.

Tech­no­log­i­cal up­grades to its fac­to­ries have made In­tel’s chips more pow­er­ful and cheaper to make. That’s a ma­jor fac­tor in In­tel’s abil­ity to in­crease its profit mar­gins.

Its busi­ness has im­proved over the past year and a half largely on ro­bust con­sumer spend­ing on dis­counted PCs. Cor­po­rate spend­ing has been a trou­bled corner of the mar­ket, with many com­pa­nies re­sist­ing PC up­grades amid lin­ger­ing busi­ness fears.

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