Intel beats profit targets
Published: 20 Apr 2005 09:25 BST
Mobile chip sales helped Intel surpass revenue and profit expectations in the first quarter, and the company said it would invest more money than expected in capital equipment in 2005 to accelerate a manufacturing shift.
Revenue for the first quarter came to $9.4bn (£4.9bn), a 17 percent jump over the same period a year ago, the chipmaker said on Tuesday. Net profit came to $2.2bn, or 34 cents a share, a 31 percent increase over the 26 cents a share recorded for the same period last year.
"As of today, worldwide demand seems pretty solid," Andy Bryant, Intel's chief financial officer, said in a conference call.
Though the first quarter of 2005 contained an extra week, which partially accounts for the rate of growth over last year, the numbers beat Wall Street expectations. Analysts had expected Intel to report $9.3bn in revenue and 31 cents in earnings per share. In March, Intel narrowed its revenue guidance from between $8.9bn and $9.4bn to between $9.2bn and $9.4bn.
Revenue in the second quarter is expected to be between $8.6bn and $9.2bn.
The results may encourage investors. Last week, an earnings miss by IBM caused the stock market to drop.
On the move
The growth comes partly from a rise in sales of mobile components, which include notebook processors, Wi-Fi chips for notebooks and processors for handsets, Intel president Paul Otellini said. The bump in sales of handset processors follows Intel's long-term campaign to win contracts in this industry. The increase in Wi-Fi chip sales is the result of a bundling strategy Intel has pursued since 2002.
Now more than 80 percent of notebooks based on Intel's Pentium M processor also come with Intel's Wi-Fi chip, said Mooly Eden, co-general manager of Intel's mobility division. That's a higher figure than when the Pentium M debuted.
Otellini added that mobile shipments helped make up a slight decline in desktop chip shipments. In desktops, however, Intel has begun to ship dual-core chips. Hundreds of thousands will be delivered this quarter, and the quarterly total will be in the millions in the future, he said.
Gross margins, or the amount of money left over after expenses, came to 59.3 percent, higher than the 57 percent expected. Gross margins typically increase when there is a shift to more-expensive parts. The company's gross margin estimate for the year was raised to 59 percent, up from an earlier estimate of 58 percent.
Intel also said it planned to increase capital spending for the year from between $4.9bn and $5.3bn to between $5.4bn and $5.8bn. The increased investment is "driven primarily by stronger-than-anticipated business and increased confidence in the company's 65nm process technology ramp," the company said.
The 65nm manufacturing process, which will be used to produce chips for sale later this year, will result in smaller, faster and ideally less expensive chips.
Accelerating a manufacturing transition can help a company gain market share. In Intel's case, the company will probably not move the date forward when these chips are released. Instead, increasing investments may allow it to produce large volumes of these chips faster than earlier expected.
"It is more a matter of what we can do in 2006," Bryant said. "I feel more confident in getting four factories to ramp."
However, unanticipated problems and other factors can neutralise a manufacturing advantage.
Did you find this article useful?
36 out of 95 people found this useful
- Share this article:
