Intel’s Sales Forecast Shows Rebound in IT Spending (Update1)
By Ian King
April 14 (Bloomberg) -- Intel Corp., the world’s biggest chipmaker, forecast rising sales this quarter and record profit margins for the year, signaling a rebound in technology spending after revenue rose 44 percent in the first three months.
Second-quarter revenue will climb as high as $10.6 billion, exceeding analysts’ predictions, and 2010 gross margins will widen to a record, Intel said yesterday. Net income surged almost fourfold in the three months through March.
Consumers served as a “big driver” of computer demand and corporate executives, more confident about their prospects, are replacing aging machinery, Intel Chief Executive Officer Paul Otellini said. The report signaled that the economic recovery is taking hold, lifting Intel and companies such as Microsoft Corp. and Texas Instruments Inc. in extended trading.
“We’re talking about the best quarter in company history and the economy has not normalized,” said Patrick Becker Jr., chief investment officer at Becker Capital Management in Portland, Oregon, who owns Intel stock as part of $2.3 billion he has under management. “These are not peak earnings.”
Intel rose 82 cents, or 3.6 percent, to $23.59 in extended trading after the announcement. The shares, which have gained 12 percent this year, closed at $22.77 on the Nasdaq Stock Market. Microsoft, the world’s largest software maker, climbed 43 cents to $30.88, and Texas Instruments Inc., the second-largest U.S. chipmaker, rose 68 cents to $26.55.
In German trading, Intel advanced as much as 5.1 percent, rising 4.4 percent to $23.82 at 10:47 a.m. in Frankfurt.
Wider Margin
In the current quarter, sales will be $10.2 billion, plus or minus $400 million, Santa Clara, California-based Intel said. Analysts had estimated $9.72 billion on average, according to a Bloomberg survey. Full-year gross margin, or the percentage of sales remaining after deducting costs of production, will be about 64 percent, compared with an earlier prediction of 61 percent, the company said.
“We are optimistic about the prospects of our business for 2010 and beyond,” Otellini told analysts on a conference call. The company, whose processors power more than 80 percent of the world’s personal computers, saw orders of chips used in corporate computers begin to increase for the first time since the recession, he said.
Intel’s dominance in the chip industry makes it a bellwether for computer demand. Its report also kicks off earnings season for the major technology companies: Google Inc. gives its results tomorrow, International Business Machines Corp. reports on April 19, and Microsoft delivers earnings on April 22.
Earlier Concerns
While Intel’s fourth-quarter results also beat analysts’ predictions, they didn’t boost the share price. The stock declined about 9 percent that earnings season, dragged down by concern chip orders were being driven by customers building up inventory, rather than real demand.
In the first quarter, demand for chips used in laptop computers and new data centers that provide computer services over the Internet boosted sales and profit. That will continue to drive revenue, helped by sales in developing markets, according to Chief Financial Officer Stacy Smith.
“Intel shows that spending dollars keep going towards technology,” Doug Freedman, an analyst at Broadpoint AmTech Inc. in San Francisco, said on Bloomberg Television.
First-quarter net income climbed to $2.44 billion, or 43 cents a share, from $629 million, or 11 cents, a year earlier. Analysts projected 38 cents a share. Revenue increased 44 percent to $10.3 billion, compared with the average estimate of $9.85 billion.
Customers aren’t building up excess stockpiles of chips, a sign the industry isn’t at risk of a supply glut, Smith said.
“When we look through the supply chain, what we see are healthy and appropriate inventory levels relative to how we see demand,” he said in an interview. “It was an incredible first quarter for us.”
To contact the reporter on this story: Ian King in San Francisco at ianking@bloomberg.net
Last Updated: April 14, 2010 04:59 EDT |
