Intel shines: 'We have seen a return of consumer demand'

Intel delivered a stronger than expected fourth quarter and a promising outlook for the next three months. In addition, Intel said consumer demand has returned.

Intel reported fourth quarter net income of $2.3 billion, or 40 cents a share, on revenue of $10.6 billion, up 28 percent from the year ago quarter (statement, preview). Wall Street was expecting earnings of 30 cents a share on revenue of $10.17 billion. The results include a $1.25 billion litigation settlement paid to AMD. Excluding that payment, Intel's earnings would have been 55 cents a share. Simply put, Intel blew away Wall Street estimates under any measure.

In prepared remarks, Intel CFO Stacy Smith said:

We have seen a return of consumer demand and replenishment to normal inventory levels after the precipitous demand drop at the end of 2008 and beginning of 2009. Operationally, the fourth quarter of 2009 was one of our most profitable quarters ever.

The most important aspect of Intel financial picture was the outlook.

For the first quarter, Intel reported revenue of $9.7 billion, give or take $400 million. At the low end, Intel's outlook is in line with the $9.35 billion expected by Wall Street. If Intel comes out ahead it will crush current estimates.

Gross margin for the first quarter is projected to be 61 percent, much higher than the 58 percent expected.

The results and the outlook weren't completely unexpected. IDC's PC unit data pointed to strong results for Intel. In a statement, Intel CEO Paul Otellini portrayed a company firing on all cylinders. Otellini said Intel "generated unprecedented operating efficiencies while growing our traditional businesses and creating exciting new market opportunities, even in difficult economic times."

During a call with analysts, Otellini said there was strength all product lines and all regions, with notebooks leading the way. The value of Nehalem, he said, was evident and that, looking ahead, the rollout of 32-nanometer microprocessors will put the company into a strong position for 2010., starting with a refresh of the entire server line. He noted that the Atom business was doing well - and not just in netbooks but also in "winning new designed for growth initiatives."

For the year, Intel reported net income of $4.4 billion, or 77 cents a share, on revenue of $35.1 billion, down 7 percent from a year ago.

In 2010, Intel is projecting continued momentum. For the year, Intel is projecting research and development spending of $6.2 billion and capital spending of about $4.8 billion. Annual gross margins will be about 61 percent.

By the numbers:

• Intel ended the quarter with total cash investments of $13.9 billion.

• Here's a look at the international breakdown:

• The breakdown by product line:

• Intel ended the quarter with 79,800 employees.
• The company paid a $1.45 billion fine to the EU in fiscal 2009 and another $1.25 billion to settle litigation with AMD.