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Intel Beats Estimates In 3Q

The popularity of its Atom processor in netbooks and signs of stability in the PC market helped the chip maker beat earnings forecasts.
Intel profits in the third quarter dropped almost 8% as the average price of its microprocessors fell. But the chip maker easily beat Wall Street estimates, driving its stock up in after hours trading.

Intel reported Tuesday that net income for the quarter ended Sept. 26 fell to $1.9 billion, or 33 cents a share, from $2.06 billion, or 35 cents a share, during the same period a year ago. Revenues dropped to $9.4 billion from $10.23 billion a year ago.

Nevertheless, Intel beat analyst estimates of 28 cents a share on revenue of $9 billion, according to a poll of 35 analysts by Thomson Financial. Intel's performance for the quarter drove its stock up more than 4.5% in after hours trading.

"This momentum in the current economic climate, plus our product leadership, gives us confidence about our business prospects going forward," Paul Otellini, president and chief executive of Intel, said in a statement.

Intel profits were likely hurt by a drop in prices for its microprocessors.

"Revenue of microprocessors, including Intel Atom processors, was better than seasonal patterns on higher volume and slightly lower average selling prices," Stacy J. Smith, chief financial officer for Intel, said in a statement. "Excluding Intel Atom processors, overall microprocessor average selling prices were slightly lower than the second quarter."

Atom is Intel's low-priced chip used primarily in netbooks, which are mini-laptops that typically sell between $300 and $500. Netbooks have been the fastest growing segment of the PC market during the economic recession.

For the fourth quarter, Intel forecast revenue of $10.1 billion, plus or minus $400 million, compared to $8.2 billion in the same period in 2008.

Gross margin in the fourth quarter of this year is expected to reach 62%, plus or minus 3 percentage points. Gross margin in the third quarter was 57.6%.

Intel's latest financial results come as the PC market shows signs of stabilizing after being hit hard in the global economic recession. PC sales bottomed out in the first quarter of this year, but a sustainable recovery marked by consistent quarterly growth isn't expected to start until the third-quarter of next year, according to Gartner. The delay is due to weak sales in the corporate market.

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