Tuesday 25 April 2017

Intel results better than expected

Intel chips run more than 80pc of the world's personal computers. Photo: Bloomberg
Intel chips run more than 80pc of the world's personal computers. Photo: Bloomberg

Intel, the world’s biggest chipmaker, predicted fourth-quarter sales that beat analysts’ estimates, helped by demand in emerging economies.

Revenue this period will be $11.4bn, plus or minus $400m the company said yesterday in a statement. That compares with an average projection of $11.3bn, according to data compiled by Bloomberg.

Corporations and households in less developed markets bought more computers, helping Intel weather slumping demand among consumers in the US and Europe, Intel Chief Financial Officer Stacy Smith said in an interview.

The results bode well for computer makers, including Dell and Hewlett-Packard, which also benefit as businesses upgrade dated machines.

“It’s clearly a positive for those companies in the PC and enterprise space,” said Pat Becker Jr of Becker Capital Management Inc in Portland, Oregon.

The company owns shares of Intel as part of the $2.2bn it oversees. “The margins in that help overcome some of the weakness we’ve seen in the consumer in August.”

The last four weeks of the quarter were better than the company predicted, Smith said on a call with analysts.

That improving demand was the basis for the company’s predictions for the fourth quarter. Component inventory remains “lean” throughout the computer supply chain, he said.

No double dip

Chief Executive Officer Paul Otellini said the PC industry is still on course to grow 18pc this year. He doesn’t anticipate a double-dip recession and sees 2011 as being a “pretty good” year for computer sales.

Intel yesterday rose less than 1pc to $19.95 in extended trading. Earlier, the shares gained 21 cents, or 1.1pc, to $19.77 on the Nasdaq Stock Market.

Today, Intel rose as much as 1.7pc in German trading, to the equivalent of $20.07 and was 1.6pc higher as of 9:10am.

Third-quarter net income rose 59pc to $2.96bn, or 52 cents a share, from $1.86bn, or 33 cents, a year earlier.

Analysts had estimated a profit of 50 cents a share. Revenue increased 18pc to $11.1bn, compared with an average prediction of $11bn.

Gross margin, the only profit indicator that Intel forecasts, will be 67pc this quarter, plus or minus “a couple” of percentage points, the company said.

The margin -- the percentage of sales remaining after deducting production costs -- was 66pc in the third quarter.

Developing economies

“We saw demand strength in emerging markets and the enterprise segment of the market,” Smith said in the interview.

“It was offset by consumer demand in developed markets being a little less than we thought when we started the quarter.”

In August, when Intel revised projections, it said gross margins wouldn’t reach the high end of an earlier forecast, coming in at 66pc, plus or minus a point.

At the time, Intel said third-quarter results would be lower than previously expected, citing weaker-than-anticipated consumer demand for personal computers in mature markets.

Otellini downplayed the threat posed by Apple’s iPad and other tablet computers that don’t feature Intel chips. Tablet sales won’t undermine PC demand, and Intel is winning contracts to get its chips into the devices, he said.

“You’re dealing with numbers that are relatively small,” Otellini said. “It gets to be a factor, but a secondary factor.”

Intel, whose chips run more than 80pc of the world’s personal computers, kicks off three weeks of earnings reports by the largest US technology companies, including IBM, Google and Microsoft.

The company -- which agreed to buy McAfee Inc for $7.68bn last quarter, its biggest acquisition -- isn’t currently considering another “large” purchase, Smith said.

Bloomberg

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