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Intel says IT industry is almost fully recovered

April 14, 2010

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After the markets closed yesterday, Intel said its first quarter results were strong, as the chip giant delivered revenue down just a tad from its 4th quarter 2009.

Intel reported net income of $2.4 billion, or 42 cents a share, on revenue of $10.3 billion, up 44 percent from 2009's levels and off about 3 percent from the 4th quarter.

Wall Street was expecting earnings of 38 cents a share on revenue of $9.84 billion. Gross margins for the fourth quarter were 63.4 percent.

In fact, Intel actually raised its outlook for the second quarter, noting that the worse seems to have past in the IT sector.

Intel is forecasting revenue of over $10 billion, with gross margins of about 64 percent. Wall Street analysts were expecting $9.7 billion. For this year, the company said it will deliver gross margins of about 64 percent, up from its previous estimate of 61 percent.

Intel said it will spend a little over $6.3 billion this year on R&D and capital spending will come in at less than 5.0 billion.

In a conference call with analysts, CEO Paul Otellini declared the IT industry almost fully recovered. Otellini said the company has its best product line ever and that the demand for its products has been incredible.

The mobile industry saw record revenues as demand for notebooks and smartphones largely exceeded previous expectations. Meanwhile, the demand by businesses, which now have aging PCs, is starting to return somewhat, Otellini said.

Intel's CEO said that the overall shift to mobility is one of the mega-trends out there for both consumer as well as corporate accounts. He said the first quarter and the first half are buoyed by a number of things, including a compelling pull for the new products and the return of corporate spending.

But he stopped short of calling it a “corporate refresh snapback.” It’s not that, he said. CIOs have a bit more budget now and they are freeing up their budgets and they’re replacing some of their older computers simply because it’s actually cheaper to replace them than to maintain them.

However, there are still tradeoffs for servers and their software, and for now, PCs are benefiting from that tradeoff.

Here are some fresh new numbers:

Intel’s PC client group delivered revenue of almost $7.7 billion, flat with the fourth quarter, but well above year ago levels.

Data center revenue dropped 8 percent from the fourth quarter to $1.87 billion.

Atom processor and chipset revenue was $355 million, down 19 percent.

Average selling prices rose slightly.

Asia Pacific revenue accounted for almost 58 percent of sales in the first quarter with the Americas checking in at about 18 percent.

For netbooks and tablet PCs, Otellini said that netbooks - viewed on an annual basis - are on track to represent about 20 percent of the mobility business, despite seasonal upticks and the benefits of new players in the fourth quarter and carryover into the first quarter.

As for tablet PCs, Otellini said he sees that market the way he did netbooks two years ago - a new category that’s market expansive. Looking forward, he expects to announce new tablet form factors later this year, using Atom on a number of different operating systems.

He added “the ramp up of our new mobile products led to better than expected average selling prices. Supply chain inventory levels appear to be healthy after several quarters of replenishment.”

“Europe, Asia Pacific and Japan performed better than seasonal. The Americas experienced a larger than seasonal revenue decline after a strong fourth quarter, however,” added Otellini.

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Source: Intel.