Mobile-computer chips made by Intel Corp again led the company’s growth with shipments jumping 68% for the quarter from a year ago.
The company had all-time revenue highs in emerging markets such as China and saw growth in Latin America nearly double, according to chief executive Paul Otellini.
Overall, revenue climbed 15% to $9.2bn. Profit rose 16% to $2.03bn, or 33 cents a share, from $1.76bn a year ago. Intel CFO Andy Bryant said it was a good second quarter, especially given this is a time when business typically is slow.
The momentum of the first half appears to be continuing as we enter the third quarter, Bryant said in a conference call. Demand is strong. The factories are full. We’re ahead of our cost targets and business is generating high levels of cash.
Looking ahead, he said the company would generate between $9.6bn and $10.2bn revenue during the current quarter.
To support higher expected demand, Intel raised it capital spending range for the year to about $5.9bn, which is good news for capital equipment makers. Previously, Intel had targeted between $5.4bn to $5.8bn.
The pace of Intel’s overall growth, however, may lose steam going forward, said Gus Richard, an analyst at First Albany Capital, which makes a market in Intel securities but does no investment banking with the company. Richard owns no Intel stock.
I’m skeptical that they can grow in the mid-teens for a sustainable period, Richard said. The overall market is not growing that fast … and notebooks can only grow so much.
Notebook microprocessors are among Intel’s highest-margin businesses and have been the company’s growth story for the past couple of years. Notebook chip revenue grew 68% to $2.1bn in the quarter, while sales of desktop PC chips — Intel’s mainstay — were flat at $4.6bn.
Intel chief executive Paul Otellini pointed to the company’s emerging markets as an area of fully untapped potential. However, computer sales in many of these regions, notably China, are closely tied to general US consumption. Therefore, it could be argued that the future of Intel’s emerging markets rely to a large degree on macroeconomic factors.
Otellini pointed to Intel facing increased competition in the server market. Chief rival Advanced Micro Devices Inc, which has been blazing a dual-core trail in servers, is the culprit.
However, Otellini said Intel already is sampling new products based on its next-generation 65-nanometer manufacturing processors and is set to launch its new Paxville server chips by the end of the year. Analyst Richard said this puts Intel about three to six months ahead of AMD in the race to 65-nm dual-core server products. But just how the two companies’ products will compare on performance, of course, remains to be seen.
AMD’s antitrust lawsuit against Intel, filed late month, as well as the European Commission’s ongoing investigation into Intel, seem to have had little effect on investor attitude so far. I wouldn’t expect that to be a big deal, Richard said. It’s business as usual.
During yesterday’s conference call, Otellini reiterated his previous statement that Intel has always acted lawfully and asked analysts to refrain from asking questions about pending litigation against the company. We unequivocally disagree with AMD’s claim and are confident this suit, like the others, would be resolved favorably to Intel, he said.
Shares in Intel closed higher on the Nasdaq yesterday at $28.71. However, the price fell roughly 4.5% in after-hours trading to $27.42.
