Intel: PC demand has hit bottom

Intel on Tuesday reported a first-quarter profit of $647m, or 11 cents per share, on revenue of $7.1bn, and suggested that the sluggish PC industry may have finally bottomed out.

Analysts had been expecting earnings of two cents on revenue of $6.98bn (£4.66bn).

In a statement, Intel president and chief executive Paul Otellini said the worst may be behind the PC industry. "We believe PC sales bottomed out during the first quarter and that the industry is returning to normal seasonal patterns. Intel has adapted well to the current economic environment and we're benefiting from disciplined execution and agility".

However, Intel's first-quarter earnings represent big declines from the previous year, as the economy has taken its toll on the chipmaker, and on other leading technology companies. Intel's revenue was down 26 percent from the same quarter a year ago. Net income and earnings per share were down from the year-ago quarter by 55 percent and 56 percent, respectively.

Despite the stronger-than-expected quarter, Intel did not issue a forecast for the second quarter. It did say that for internal purposes, it is planning for revenue to be flat.

At the end of the first quarter, Intel launched its 'Nehalem' Xeon chips, describing the launch as the biggest announcement since the release of the Pentium Pro chip in 1995. In recent weeks, the chip has been at the heart of big announcements by HP, Cisco, Sun and others.

On a call with analysts on Tuesday, Otellini said the response to Nehalem has been "remarkable" and that the company should ship its one-millionth chip this week. He also noted that the consumer segment "held up much better than the enterprise", especially in notebooks.

Intel also said that revenue from the Atom microprocessors and chipsets was $219m for the quarter, down 27 percent sequentially. At an investor conference in February, Otellini said he did not foresee netbooks that use the Atom chips cannibalising notebooks. Instead, he said, the growth of netbooks will take off in a similar route to the way in which mobile phones are now sold: that is, subsidised by the service provider and tied to a contract.