The perking up of the firm’s financial prospects follows a bumper first half which segued into inventory concerns over the summer, and a lower than originally forecast third quarter. This all came against a background of product delays and cancellations.
Intel said that revenues for the quarter would be $9.3 billion to $9.5 billion, well up on the $8.6 billion to $9.2 billion range it set in its third quarter earnings announcement. Gross margins will be 55% to 57%, compared to the 56% it had expected.
In addition, the company said it is making progress on reducing inventory, and expected net inventory to be down several hundred million dollars by the end of the quarter. All its other expectations are unchanged.
The revenue range set surpassed the $9.07 billion analysts had been expecting before the third quarter results announcement.
Intel CFO Andy Bryant said the forecast represented a return to what we’d call normal and reflected better than anticipated performance across all major markets and geographies.
However, he refused to be drawn on the prospects beyond the fourth quarter. I want to see how the quarter pans out and how the backlog looks in January before I make a call on Q1.
Bryant explained the seeming paradox between large inventories and shortages in some areas, by saying that to ensure flexibility, the company tended to hold inventory at die level. Once demand spikes as has happened this quarter die-level product had to be assembled, packaged, tested and shipped, leading to a short-term bottleneck.
In addition, Intel said it was reviewing a tax law passed earlier this year that allows firms to repatriate cash to the US at a temporary effective tax rate of 5.25%. The firm said up to $6 billion of earnings at subsidiaries could be eligible for this rate. Intel said it could accrue charges in the fourth quarter and/or future periods depending on the timing of decisions relating to such a repatriation.
