Intel Profit Hits High End of Target

Intel Corp. (INTC), the world's largest chip maker, Tuesday reported a 25 percent rise in quarterly profit as revenue reached the second-highest level in the company's history, helped by strong demand for its Centrino notebook computer chips.

Intel shares jumped more than 3 percent on the report, which came in at the top end of the company's previous targets. The strong results stood in stark contrast to a shortfall reported by International Business Machines Corp. (IBM) last week.

"We still see pretty solid demand around the world," Intel Chief Financial Officer Andy Bryant said in an interview. "I can't yet say that I see the signs of weakness that IBM saw."

Intel also raised its annual gross margin forecast and boosted its annual budget for spending on chip factories, lifting shares of suppliers of semiconductor manufacturing equipment.

"It looks strong to me," said Eric Ross, the semiconductor analyst with ThinkEquity Partners. "Clearly revenue was above what I think most people were expecting."

Net income in the first quarter ended April 2 rose to $2.15 billion, or 34 cents a share, compared with a year-earlier profit of $1.73 billion, or 26 cents a share. Sales rose to $9.43 billion from $8.09 billion, slightly below the all-time company record of $9.6 billion set in the fourth quarter of 2004.

The results from the Santa Clara, Calif.-based company topped the average Wall Street expectation of a profit of 31 cents a share on sales of $9.31 billion, according to a poll of analysts by Reuters Estimates.

"Intel beat across the board," said Steve Neimeth, portfolio manager at AIG SunAmerica Mutual Funds, who oversees funds owning about 200,000 Intel shares.

Intel shares rose as much as 3.6 percent to $23.45 in after-hours action following the news, which came after the close of regular session trading. That built on a 1.9 percent gain on Nasdaq ahead of the report.

Intel said it expected revenue in the second quarter to be in a range of $8.6 billion to $9.2 billion, in line with the average analyst expectation of $8.9 billion. Gross profit margin, the percentage of sales left over after accounting for production costs, was forecast to be about 56 percent, plus or minus a couple of points.

The first-quarter report came in at the top end of an upbeat financial forecast Intel gave on March 10. At the time, Bryant bumped up the company's revenue and profitability targets after Intel's manufacturing plants scrambled to meet demand for notebook computer chips.

Intel boosted its budget on capital spending for the year to a range of $5.4 billion to $5.8 billion, from an earlier target of $4.9 billion to $5.3 billion. Shares of chip equipment makers rose - Applied Materials Inc. (AMAT) were up more than 3 percent and KLA-Tencor Corp. (KLAC) shares were up more than 4 percent.

Bryant said in an interview that the company has continued to see tightness in supply for some products, and has been having success with its 65-nanometer manufacturing process.

Helped by the popularity of its Centrino brand of chips for notebook PCs, Intel's share of the market for PC microprocessors rose by about 1 percentage point last year to 81.5 percent, while rival Advanced Micro Devices Inc. (AMD) saw its share slip by about a point to around 16 percent.

At the same time, the chip maker faces several challenges, including AMD's Opteron chip for business computers, a recent reorganization of the company, and an upcoming transition to a new chief executive officer.