Enterprises drive Intel to record earnings

Intel's record earnings for its first quarter of 2011 reflect increasing demand from the enterprise and emerging markets
Written by Jack Clark, Contributor on

Intel has reported record earnings for the first quarter of 2011, driven by a combination of demand from the enterprise, continued growth in its mainstream processor division and a successful resolution of the Sandy Bridge Cougar Point chipset flaw.

On Tuesday, the Santa Clara-based chipmaker reported first financial quarter revenues of $12.9bn (£7.89bn), with an operating income of $4.3bn, both up 25 percent on the same quarter a year ago. Profit was up seven percent on the previous quarter and revenue up 12 percent.

"The first-quarter revenue was an all-time record for Intel, fuelled by double-digit annual revenue growth in every major product segment and across all geographies," Paul Otellini, Intel's chief executive, said in a statement.

Its earnings were driven by the same drivers as those that allowed it to report a record-breaking fourth quarter in January.

Intel's most significant business division, its PC Client Group, grew 17 percent year-on-year with quarterly revenues of $8.6bn. During the quarter the group had to absorb the impact of the Cougar Point chipset problem that affected some of Intel's flagship Sandy Bridge range of processors, which also launched in the quarter.

At the time the chipset problem was discovered, Intel thought it would cost it $1bn to fix, but on the conference call Otellini said Intel "identified, fixed and recovered from the Cougar Point chipset design issue, completely mitigating the $300m revenue impact that was originally forecasted".

Intel's second most important division, the enterprise-focused Data Centre Group, reported its revenue was up 32 percent on the previous year at $2.4bn, but down two percent sequentially. It concentrates on chips, chipsets and motherboards for servers, business workstations and storage hardware.

"We are very bullish about our datacentre business and expect it to be a major growth driver for years to come," Otellini said.

We are very bullish about our datacentre business and expect it to be a major growth driver for years to come.
– Paul Otellini, Intel

During the quarter, Intel launched a range of Sandy Bridge-based single socket Xeons as part of a concerted effort to break into the emergent 'microserver' hardware class. Otellini also said that other industry trends were in the company's favour. "The cloud build-out continues to be a major driver of growth for the company, with demand from China showing notable strength this quarter," he said.

"We continue to benefit from demand strength in the enterprise and emerging-market segments, despite softness in the consumer market segments of the US and western Europe. The server business exceeded our expectations as strong demand from the datacentre segment continued," Stacy Smith, Intel's chief financial officer, said in her commentary on the quarter's performance.

The company's "other Intel architecture group", which includes sales of chips and chipsets for the embedded, home-entertainment, low-powered and mobile-device categories, contributed $1.14bn, up 70 percent year-on-year.

Intel spending

Additionally, Intel closed the acquisitions of Infineon's wireless division and McAfee, which contributed a combined revenue of $496m to its earnings. The purchases were strategic ones, adding weight to Intel's strategy of pushing further into the mobile-device sector and embedding greater security into its products.

For the coming financial year Intel anticipates spending around $15.7bn on a combination of research and development, and mergers and acquisitions. At the same time, Intel is going to move to a new process node for its silicon production, stepping from the 32nm seen in the recent Sandy Bridge and Westmere-EX families to 22nm with the Ivy Bridge microarchitecture.

The company also anticipates spending $10.2bn on capital in 2011, which, according to figures from IC Insights, will make it the largest spender on capital — predominantly foundries — in the industry.

By revenue, Intel represented the largest semiconductor company in the world in 2010, holding a 14-percent share of the overall market, according Gartner.

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