Intel 1Q profit nearly quadruples; company predicts increased profitability

By Jordan Robertson, AP
Tuesday, April 13, 2010

Intel 1Q profit nearly quadruples from a year ago

SAN FRANCISCO — Intel Corp. said Tuesday its net income in the first quarter nearly quadrupled over last year and reflected an overall bump in spending on technology by companies. The results sent Intel shares higher.

Among other things, Intel got a lift from sales of new chips for computer servers — the kind of purchase that many companies delayed in the recession. And Intel’s chief financial officer, Stacy Smith, said in an interview that demand for processors for higher-end laptops was stronger than expected as corporations upgraded their workers’ computers.

That is a change from what Intel saw in the past few quarters, when its growth was largely driven by consumer demand for “netbooks,” stripped-down laptops used mostly for surfing the Internet. Chips for those machines are less profitable than chips for regular laptops.

Smith also said the company expects to hire about 1,000 people this year worldwide. Intel currently has 79,900 employees, down from 82,500 a year ago.

Intel became the first major technology company to report earnings for the first quarter when it said after the market closed Tuesday that it earned $2.4 billion, or 43 cents per share, in the period.

Analysts polled by Thomson Reuters were expecting profit of 38 cents per share.

In the same period last year, Intel earned $629 million, or 11 cents per share — figures that were depressed by a big charge Intel took to write down the value of an investment. It was also one year ago that CEO Paul Otellini predicted that personal computer sales had “bottomed out” — an early forecast that proved true.

Intel’s revenue in the latest period jumped 44 percent to $10.3 billion, ahead of analysts’ forecast for $9.8 billion.

The company also raised its forecast for a key performance measurement. Intel now predicts a gross profit margin of 62 percent to 66 percent of revenue in 2010, up from its previous guidance of 58 percent to 64 percent of revenue.

Intel shares rose 23 cents, 1 percent, to close at $22.77 before the earnings report. In after-hours trading the shares jumped 90 cents, nearly 4 percent, to $23.67.

Intel’s numbers could be an early preview of a healthy quarter for the technology industry, because many kinds of suppliers would benefit if large companies are beginning to spend more money on computers and other equipment after freezing their budgets during the recession.

Worldwide information technology spending is expected to rise more than 5 percent in 2010, after falling 1 percent in 2009, according to market research firm Gartner Inc. However, a weaker dollar is expected to help stimulate this year’s growth, suggesting that the computing industry is lurching back to life in only some areas.

Sales of servers, the behind-the-scenes computers that run Web sites and crunch data for companies, are one important area, especially for Intel and rival Advanced Micro Devices Inc. because server processors are among their most profitable products. AMD reports its first-quarter numbers Thursday.

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