Intel posts biggest quarterly profit in a decade
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.