Intel, the world's biggest chipmaker, forecast sales and profitability that topped estimates, indicating that computer demand is returning to pre- recession levels. The shares jumped 6.4 per cent.
For the fourth quarter, Intel forecast sales of $US9.7 billion to $US10.5 billion, compared with the $US9.5 billion average estimate in a Bloomberg survey. Third-quarter net income dropped to $US1.86 billion, or 33 cents a share, the company said today in a statement. Revenue fell 8.1 per cent to $US9.39 billion.
Today's numbers were all the more impressive because Intel raised its outlook two months ago, said Patrick Wang, an analyst at Wedbush Morgan Securities in New York. Chief Executive Officer Paul Otellini expects the PC market to grow this year, defying analysts' predictions.
"They had a phenomenal quarter once again," said Wang, who expects the shares to outperform their peers. "They beat expectations on revenue and from a gross-margin standpoint."
Intel rose $US1.31 to $US21.80 in extended trading. The shares, up 40 per cent this year, closed at $US20.49 on the Nasdaq Stock Market.
Net income was down 7.8 per cent from $US2.01 billion, or 35 cents a share, in the year-earlier period. In August, Intel said that third-quarter sales would be as much as $US9.2 billion, compared with an August prediction of up to $US8.9 billion.
Profit margin
Gross margin, the percentage of sales remaining after the costs of production, was 58 per cent in the third quarter. That compared with Intel's prediction of about 53 per cent. This quarter, it will widen to about 62 per cent, the company said.
Intel's report kicked off two weeks of earnings by big US technology companies, including IBM, Google and Microsoft. The use of Intel's chips in everything from laptops to supercomputers makes its sales a barometer of industry demand.
"Everyone has been pretty surprised at the strength of technology throughout the downturn," said Kim Caughey, an analyst at Pittsburgh-based Fort Pitt Capital Group, which owns about $US1 million worth of Intel shares. "Whether or not we're still in a recession, companies and retailers and customers alike are very careful about where they're spending their money. Clearly they're still buying computers and all things electronic."
New Windows
Microsoft is introducing a new Windows operating system this month - an event that typically triggers a surge in PC orders. The question now is how long that boost will last. Orders for PC parts are ebbing, indicating that Intel's sales may slow again, said Daniel Berenbaum, an analyst at Auriga USA in New York.
PC makers have accumulated inventory, which may curb their demand for Intel's chips later, he wrote in a report.
Research firm Gartner, expects the PC market to grow in the fourth quarter. For the full year, it predicts a decline in global shipments of 2 per cent to 285 million.
China's stimulus program may be helping the market by giving shoppers money to spend on PCs, said Edwin Mok, an analyst for Needham & Co. He recommends buying Intel shares, which he doesn't own.
"The PC has been one of the bright spots this year," Mok said.