Intel forecasts record profit margin as technology spending rebounds

Santa Clara, California: Intel Corporation, the world's biggest chipmaker, forecast rising sales this quarter and record profit margins for the year, signalling a rebound in technology spending after revenue rose 44 per cent in the first three months.

Second-quarter revenue will climb as high as $10.6 billion (Dh38.9 billion), exceeding analysts' predictions, and 2010 gross margins will widen to a record, Intel said Tuesday. Net income surged almost fourfold in the three months through March.

Consumers served as a "big driver" of computer demand and corporate executives, more confident about their prospects, are replacing ageing machinery, Intel chief executive officer Paul Otellini said.

The report signalled that the economic recovery is taking hold, lifting Intel and companies such as Microsoft and Texas Instruments in extended trading.

Best quarter

"We're talking about the best quarter in company history and the economy has not normalised. These are not peak earnings," said Patrick Becker Jr, chief investment officer at Becker Capital Management in Portland, Oregon, who owns Intel stock as part of $2.3 billion he has under management.

Intel rose 82 cents, or 3.6 per cent, to $23.59 in extended trading Tuesday after the announcement. The shares, which have gained 12 per cent this year, closed at $22.77 on the Nasdaq Stock Market.

Microsoft, the world's largest software maker, climbed 43 cents to $30.88, and Texas Instruments, the second-largest US chipmaker, rose 68 cents to $26.55.

In German trading, Intel advanced as much as 5.1 per cent, rising 4.4 per cent to $23.82 at 10.47am in Frankfurt yesterday. In the current quarter, sales will be $10.2 billion, plus or minus $400 million, Intel said.

Analysts had estimated $9.72 billion on average, according to a Bloomberg survey. Full-year gross margin, or the percentage of sales remaining after deducting costs of production, will be about 64 per cent, compared with an earlier prediction of 61 per cent, the company said.

"We are optimistic about the prospects of our business for 2010 and beyond," Otellini told analysts on a conference call.

The company, whose processors power more than 80 per cent of the world's personal computers, saw orders of chips used in corporate computers begin to increase for the first time since the recession, he said.

Intel's dominance in the chip industry makes it a bellwether for computer demand. Its report also kicks off earnings season for the major technology companies: Google gives its results today, International Business Machines (IBM) reports on April 19, and Microsoft delivers earnings on April 22.

While Intel's fourth-quarter results also beat analysts' predictions, they didn't boost the share price.

The stock declined about 9 per cent that earnings season.

ASML order book exceeds forecasts

Dutch chip equipment maker ASML added to hopes for an acceleration in the tech sector's recovery with first-quarter orders that beat the most optimistic expectations and a record sales outlook.

ASML's results echoed positive signals from Intel, the world's largest chip maker and one of ASML's biggest clients, which said on Tuesday it was seeing increased spending by corporations. Analysts view ASML's order book developments as a barometer for expectations from the big chipmakers.

Earlier yesterday, Taiwan Semiconductor Manufacturing, the world's largest contract chip maker and one of ASML's clients, said it expected global chip sales to increase 22 per cent this year and 7 per cent next year. ASML shares were up 1.5 per cent at 26.54 euros (Dh132.4) at 8.13am GMT in Amsterdam, slightly outperforming the European technology index, which was up 1 per cent. The shares are up 17 per cent so far this year.