Intel Corp’s first-quarter profit matched Wall Street’s subdued expectations, a sign the company’s core microprocessor business remained healthy amid fears of a broader slowdown in technology spending.
The stock jumped about 7 percent in after-hours trading on Tuesday after the technology bellwether forecast higher profit margins in the second quarter and signaled that it is thriving while its smaller rival, Advanced Micro Devices Inc, continues to stumble.
Santa Clara-based Intel said on Tuesday that its net profit for the three months ended March 29 was US$1.44 billion, or US$0.25 per share. That represents a 12 percent decline from the year-ago period, when Intel earned US$1.64 billion or US$0.28 per share. But it was in line with the average estimate of analysts polled by Thomson Financial.
Intel’s sales of US$9.67 billion — a 9 percent improvement over last year and a record for the first quarter — came in slightly higher than Wall Street’s estimate of US$9.63 billion.
Intel’s chief financial officer, Stacy Smith, said the results reflect the company’s ability to overcome slumping prices in some segments of the semiconductor market with a new chip-making process that lowers the manufacturing costs for each chip.
“What we’re seeing is the strength of the core business is offsetting that weakness,” Smith said in an interview.
Intel is the world’s No. 1 maker of microprocessors with about three-quarters of the worldwide market. AMD, which has been dragging under the weight of heavy acquisition costs and fierce competition, is No. 2.
Intel began making NAND flash in 2006 under a joint venture with Micron Technology Inc to cash in on growing demand for the most popular type of memory for consumer electronics, a move that some analysts now say was ill-timed considering the price plunge for those chips.
Intel chief executive Paul Otellini said the joint venture is rethinking how much factory space it wants to devote to making NAND flash and has delayed construction on its new factory in Singapore for the memory chips as a result.
He said economic jitters did not appear to have harmed Intel in its major markets during the latest quarter.
Microprocessor prices were flat in the first quarter and unit sales declined from the fourth quarter. Smith said those results were in line with seasonal trends in the semiconductor industry.
The company forecast second-quarter sales of between US$9 billion and US$9.6 billion, which was in line with analyst expectation.
Intel’s gross profit margin — a key measure of its ability to control the cost of making its chips — is expected to be 56 percent, plus or minus a couple percentage points, higher than the gross profit margin of 53.8 percent in the first quarter.
Intel and AMD have been hurt by their intensifying competition.
AMD is scheduled to report first-quarter results today.
The Sunnyvale-based company warned last week that sales across all business units were lower than expected and that it plans to cut 10 percent of its global work force, or about 1,600 workers.
Analysts are expecting a loss of US$0.51 per share on US$1.51 billion in sales.
Intel finished cutting about 10,500 workers, or 10 percent of its own work force, last year in a move to shore up profits amid fierce competition with AMD.
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