Intel Corp has provided some insight into the state of global PC demand, telling Wall Street that while technology spending may be slumping, the chip maker fully expects its profits to hold steady.
The Santa Clara, California-based company, the world’s largest maker of PC microprocessors, said on Tuesday that its third-quarter profit rose 12 percent, beating analysts’ estimates.
The increase was driven in large part by technological advances that lower Intel’s cost of making each chip, which helps the company wring out more profits even in tough economic times.
Sales, in fact, rose just 1 percent, helped by a 20 percent jump in revenues from laptop microprocessors, but were held down overall by lower sales of desktop and server microprocessors. Intel missed the consensus revenue estimate by about US$40 million.
Wall Street was already expecting that Intel’s third-quarter results would be in line with analyst forecasts, since a spending freeze by many corporate information technology departments did not fully emerge until late in the quarter, when the financial crisis worsened dramatically.
As the first major tech company to report earnings for the July to last month period, investors were looking to Intel for signs about the health of the overall sector heading into the holiday season and next year.
Intel cautioned that economic turbulence makes it hard to reliably predict fourth-quarter results. But the company still forecast healthy and relatively unchanged profit margins.
That was seen as a sign things might not get as bad as some market-watchers fear.
Net income for the three months ended Sept. 27 was US$2.01 billion, or US$0.35 per share. That compares with US$1.79 billion, or US$0.30 per share, from the year-ago period, the company said. Analysts surveyed by Thomson Reuters expected US$0.34 per share in profit.
Sales were US$10.22 billion, just a 1 percent increase over last year, but Intel said the figure was a record for the third quarter. Analysts expected US$10.26 billion.
Stacy Smith, Intel’s chief financial officer, said because of the economic uncertainty, Intel plans to update investors in early December, ahead of the formal fourth-quarter report, about the company’s finances.
“We have a high degree of uncertainty around demand in the fourth quarter, but our execution is good,” he said in an interview.
While Intel is thriving, its smaller rival, Advanced Micro Devices Inc, is planning to spin off its factories to cut costs. AMD announced last week that it’s partnering with the Persian Gulf state of Abu Dhabi in the joint venture.
The deal is an acknowledgment that AMD cannot compete alone against Intel in the very expensive chore of semiconductor manufacturing.
AMD reports its third-quarter results today. Analysts are expecting a loss of US$0.40 per share on US$1.48 billion in sales.
Intel chief executive Paul Otellini warned that it’s “hard to know” what impact the financial crisis would have on demand for Intel’s chips in the fourth quarter. Still, Otellini said he expects Intel to “out-pace peer companies” during the period because of its sales momentum and strong products and balance sheet.
Intel predicted a gross profit margin of 59 percent of revenues, plus or minus a couple of percentage points, in the fourth quarter.
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At least 35 people were killed and dozens more injured when a man plowed his car into pedestrians exercising around a sports center in the southern Chinese city of Zhuhai on Monday night. Footage showing bodies lying on the pavement appeared on social media in the hours after the crash, but had vanished by early Tuesday morning, and local police reported only “injuries.” It took officials nearly 24 hours to reveal that dozens had died — in one of the country’s deadliest incidents in years. China heavily monitors social media platforms, where it is common for words and topics deemed
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