Intel: Solid quarter; cuts capital spending; hit on chip pricing

Intel delivered a solid second quarter Tuesday with net income of $1.3 billion, or 22 cents a share, on revenue of $8.7 billion. That net income figure included tax gains that boosted earnings by 3 cents a share.

According to Thomson Financial, Intel was expected to report earnings of 19 cents a share on revenue of $8.54 billion. Backing out that tax gain  Intel's quarter hit estimates.

As far as the outlook goes (see statement) Intel's third quarter looks in line with expectations. Intel said third quarter revenue will be between $9 billion and $9.6 billion. Analysts were expecting $9.36 billion in revenue and earnings of 27 cents a share.

Among the more notable figures regarding Intel:

• Gross margin in the second quarter took a hit at 46.9 percent, lower than expectations. Intel cited lower average selling prices. Reading between the lines this figure could be attributed to AMD's pricing. Ahead of the earnings release, ThinkEquity Partners analyst Eric Ross wrote in a research note:

"AMD is gaining share back in consumer PCs. We believe investors will be surprised how fast AMD will gain share back in PCs. Much of this is driven by Dell, which is ramping faster than anticipated. Some is new consumer notebook wins which we believe will drive AMD's ASPs upward. We believe this will hurt Intel, but not too much."

• Third quarter R&D spending is expected to be between $2.7 billion and $2.8 billion. For the year, Intel will spend $5.7 billion on R&D up from the $5.6 billion projected by Intel before.
• Capital spending will be about $4.9 billion in 2007 below prior expectations of $5.5 billion or so.
• Digital enterprise group revenue was $4.64 billion, flat with the same quarter a year ago. Second quarter mobility group revenue was up nicely at $3.3 billion, up from $2.69 billion a year ago.