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July 20, 2011, 5:51 PM EDT
By Ian King
(Updates with comment from CEO in ninth paragraph.)
July 20 (Bloomberg) -- Intel Corp., the world’s biggest chipmaker, forecast third-quarter sales that exceeded some analysts’ estimates, buoyed by corporate computer upgrades and first-time purchases by consumers in emerging markets.
Revenue will be $14 billion, plus or minus $500 million, Intel said today in a statement. That compares with $13.5 billion, the average of analysts’ projections compiled by Bloomberg. Gross margin, the percentage of sales left after deducting production costs, will be about 64 percent.
Corporate purchases of personal computers and servers and sales to consumers in developing countries such as Brazil and China are outweighing stagnant sales of laptops in the U.S. and Europe. Greater demand for Intel’s powerful chips for business machines raises average selling prices and boosts Intel’s profitability.
“Even though things may have slowed in the U.S. and Europe, their business has held in fairly well,” said Patrick Wang, a New York-based analyst at Evercore Partners Inc. “Consumer notebook is weak, while the enterprise has held up.” Wang rates Intel shares “equal weight.”
Intel lost 7 cents to $22.99 at 4 p.m. New York time on the Nasdaq Stock Market. The stock has gained 9.3 percent this year.
Second-quarter net income rose to $2.95 billion, or 54 cents a share, from $2.89 billion, or 51 cents, a year earlier, the Santa Clara, California-based company said. Analysts on average had estimated profit of 51 cents. Sales increased 21 percent to a record $13 billion, compared with an average prediction of $12.8 billion.
Gross margin, the only measure of profitability that Intel forecasts, was 60.6 percent in the second quarter.
Cloud Computing
The technology industry needs one server computer for every 600 smartphones in use, and one for every 122 tablets, Intel Chief Executive Officer Paul Otellini told analysts in May. That means that even though Intel has so far failed to enter the mobile-phone processor business directly, it’s benefitting from rising demand for computer services provided over the Internet in the so-called cloud. Companies also need servers to handle a rising tide of high-definition video and other data over the Internet.
“The whole explosion of global devices and Internet services is driving significant growth for us,” Otellini said in an interview today. “I don’t see it abating. As more and more of the Internet traffic moves to HD video, it’s going to drive more of that infrastructure.”
Intel’s data-center sales will jump to $10 billion this year, and they’ll double to $20 billion within five years, Otellini has predicted.
Broader PC Market
Intel’s rosy forecast contrasted with disappointing reports on the broader PC market last week. On July 13, IDC said global PC shipments rose 2.6 percent in the second quarter, below the market-researcher’s projection for a 2.9 percent gain. U.S. shipments dropped 4.2 percent, IDC said. The same day, Gartner Inc. said worldwide PC sales increased 2.3 percent from a year earlier, compared with the 6.7 percent rise the firm predicted.
Intel’s processors run more than 80 percent of the world’s PCs. The company’s earnings have outperformed the industry so far this year because a greater portion of its sales come from emerging markets, which Intel says are harder for analysts to track when tallying total PC sales.
Intel’s profit was helped by a lower tax rate in the quarter. It paid 24.9 percent, compared with a prediction of 29 percent, because it got more profit in countries where the rates are lower, the company said.
(Intel will hold a conference call with analysts to discuss the results at 5:30 p.m. New York time. To listen go to {LIVE } or www.intc.com.)
--Editors: Jillian Ward, Lisa Rapaport
To contact the reporter on this story: Ian King in San Francisco at ianking@bloomberg.net
To contact the editor responsible for this story: Tom Giles at tgiles@bloomberg.net.
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(Updates with comment from CEO in ninth paragraph.)
July 20 (Bloomberg) -- Intel Corp., the world’s biggest chipmaker, forecast third-quarter sales that exceeded some analysts’ estimates, buoyed by corporate computer upgrades and first-time purchases by consumers in emerging markets.
Revenue will be $14 billion, plus or minus $500 million, Intel said today in a statement. That compares with $13.5 billion, the average of analysts’ projections compiled by Bloomberg. Gross margin, the percentage of sales left after deducting production costs, will be about 64 percent.
Corporate purchases of personal computers and servers and sales to consumers in developing countries such as Brazil and China are outweighing stagnant sales of laptops in the U.S. and Europe. Greater demand for Intel’s powerful chips for business machines raises average selling prices and boosts Intel’s profitability.
“Even though things may have slowed in the U.S. and Europe, their business has held in fairly well,” said Patrick Wang, a New York-based analyst at Evercore Partners Inc. “Consumer notebook is weak, while the enterprise has held up.” Wang rates Intel shares “equal weight.”
Intel lost 7 cents to $22.99 at 4 p.m. New York time on the Nasdaq Stock Market. The stock has gained 9.3 percent this year.
Second-quarter net income rose to $2.95 billion, or 54 cents a share, from $2.89 billion, or 51 cents, a year earlier, the Santa Clara, California-based company said. Analysts on average had estimated profit of 51 cents. Sales increased 21 percent to a record $13 billion, compared with an average prediction of $12.8 billion.
Gross margin, the only measure of profitability that Intel forecasts, was 60.6 percent in the second quarter.
Cloud Computing
The technology industry needs one server computer for every 600 smartphones in use, and one for every 122 tablets, Intel Chief Executive Officer Paul Otellini told analysts in May. That means that even though Intel has so far failed to enter the mobile-phone processor business directly, it’s benefitting from rising demand for computer services provided over the Internet in the so-called cloud. Companies also need servers to handle a rising tide of high-definition video and other data over the Internet.
“The whole explosion of global devices and Internet services is driving significant growth for us,” Otellini said in an interview today. “I don’t see it abating. As more and more of the Internet traffic moves to HD video, it’s going to drive more of that infrastructure.”
Intel’s data-center sales will jump to $10 billion this year, and they’ll double to $20 billion within five years, Otellini has predicted.
Broader PC Market
Intel’s rosy forecast contrasted with disappointing reports on the broader PC market last week. On July 13, IDC said global PC shipments rose 2.6 percent in the second quarter, below the market-researcher’s projection for a 2.9 percent gain. U.S. shipments dropped 4.2 percent, IDC said. The same day, Gartner Inc. said worldwide PC sales increased 2.3 percent from a year earlier, compared with the 6.7 percent rise the firm predicted.
Intel’s processors run more than 80 percent of the world’s PCs. The company’s earnings have outperformed the industry so far this year because a greater portion of its sales come from emerging markets, which Intel says are harder for analysts to track when tallying total PC sales.
Intel’s profit was helped by a lower tax rate in the quarter. It paid 24.9 percent, compared with a prediction of 29 percent, because it got more profit in countries where the rates are lower, the company said.
(Intel will hold a conference call with analysts to discuss the results at 5:30 p.m. New York time. To listen go to {LIVE } or www.intc.com.)
--Editors: Jillian Ward, Lisa Rapaport
To contact the reporter on this story: Ian King in San Francisco at ianking@bloomberg.net
To contact the editor responsible for this story: Tom Giles at tgiles@bloomberg.net.
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