Intel Soars To Record Earnings

Business spending, particularly in the data center group, led the chipmaker to income and revenue peaks in the fourth quarter.
Intel again reported a record quarter, as businesses continued to spend on computers running the chipmaker's products, offsetting slower sales among consumers.

The company reported Thursday that net income in the fourth quarter, ended Dec. 25, rose 10% to $3.4 billion, or 59 cents a share, from $3.1 billion, or 55 cents a share, from the same period a year ago. Revenue rose 8% to $11.5 billion and operating income increased 16% to $4.3 billion. All three metrics were records, and revenue beat Wall Street analyst estimates of $10.73 billion, according to a survey by Thomson Reuters.

Intel is the first major technology company to report earnings for the last quarter of 2010. The manufacturer's processors are in 80% of the world's computers and its results are considered a bellwether for the industry.

The biggest revenue boost came from Intel's data center group, where sales grew by 15% from the third quarter. The group is responsible for the processors Intel makes for computer servers and other business hardware. Revenue from the PC client group, which includes sales of products for consumer desktops and laptops, was flat, along with revenue from Intel's Atom microprocessors and chipsets. The latter are found mostly in mini-laptops called netbooks.

Intel also rode increased spending by businesses to record revenue in the third quarter. Business purchases since the end of the recession have offset the weaker consumer market, as many people struggle to find work in a jobless recovery.

Looking to this year, Intel is poised to take advantage of the rising sales of tablets, which are expected to be the hottest segment of the computer market. Intel-based systems will likely be the top choice for businesses buying tablets, Greg Richardson, analyst for Technology Business Research, told InformationWeek.

In addition, as the use of tablets increases among businesses, so will the amount of data created, since the mobile computers will likely be an added device to the laptops that employees use. As the amount of data increases, so will the need for more servers running Intel Xeon processors, Richardson says. "Tablets are going to present Intel with a multifaceted opportunity for growth."

Intel forecasts revenue for the first quarter of this year to reach $11.5 billion, plus or minus $400 million. Gross margin is expected to be 64%, plus or minus a couple of percentage points. Sandy Bridge, codename for Intel's second-generation of Core processors for desktops and laptops, is expected to be a major sales driver in the first quarter. All the major computer makers introduced Sandy Bridge-based products this month at the Consumer Electronics Show in Las Vegas.

For the full year, gross margin is expected to be 65%, plus or minus a few percentage points. Intel plans to boost capital spending, which encompasses mostly its manufacturing facilities, to $9 billion, which is $3.8 billion more than in 2010.


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