Intel keeps good 2Q earnings news going

By Reuters
Posted July 13, 2010 at 4:38 p.m.

Intel Corp. delivered a better-than-expected sales forecast and results on strong corporate demand for personal computers and servers, despite concerns over a tech industry slowdown.

Shares of the world’s No. 1 chipmaker rose 5 percent, to $22.06, after hours on the strong second-quarter report. The news also boosted sector stocks and Standard & Poor’s 500 stock index futures, suggesting a strong open Wednesday.

“I’d expect that the enterprise market continues to be strong into the third quarter,” Stacy Smith, Intel’s chief financial officer, told Reuters.

Intel said revenue in the three months ended June 26 totaled $10.8 billion, up from $8 billion a year earlier period and above the $10.25 billion expected by analysts polled by Thomson Reuters I/B/E/S.

Gleacher & Co. analyst Doug Freedman said new products in Intel’s data center group, which makes chips for servers used by corporations, provided a big lift to Intel’s top line.

“Corporate spending for large server farms was much stronger than people expected,” said Freedman.

The company posted net income of $2.9 billion, or 51 cents a share, versus a net loss of $398 million, or 7 cents a share, in the second quarter of 2009, when Intel’s results included a $1.4 billion fine by the European Commission.

Analysts had expected earnings of 43 cents per share in the second quarter.

Intel said its gross profit margin in the second quarter was 67 percent, exceeding the 64 percent expected by analysts.

“In a quarter where people expected relatively strong performance, they beat that pretty handily and set a good forecast. They seem unaffected by the negativity that’s impacting equities,” said Charter Equity Research analyst Edward Snyder.

Looking forward, Intel estimated revenue in the third quarter of $11.6 billion, plus or minus $400 million, exceeding the $10.92 billion expected.

Intel CEO Paul Otellini said that the PC and server segments are healthy.

Intel shares closed up 2.14 percent, at $21.01, before the earnings announcement. In extended trading, Microsoft Corp. rose 2.3 percent and Advanced Micro Devices Inc. climbed 5 percent.

Shares of Intel, whose chips are used in the majority of the world’s personal computers, have slid alongside those of other chipmakers in recent months, as investors fret about a potential build-up in chip inventories industrywide, as well as concerns about the European debt crisis.

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