Intel posts record £7bn quarter, hails 'exciting' tablets

Intel has brought in record revenue in the third quarter due to strong server chip sales, and chief exec Paul Otellini says the company is taking a 'longer view' of the tablet market
Written by David Meyer, Contributor on

Intel reported record quarterly revenue on Tuesday, which it credited to good sales of its higher-end processors.

The chipmaker's third-quarter revenue figure of $11.1bn (£7bn) marked a rise of 18 percent year-on-year. Operating income was $4.1bn, and net income was $3bn.

PC client group revenue and datacentre group revenue were each up three percent from the previous quarter, but Atom microprocessor and chipset revenue was down four percent from the previous quarter.

According to chief executive Paul Otellini, Intel has experienced a "soft" market in western Europe and the US, but markets such as China are producing "solid results". The enterprise segment remains "steady and consistent", he said in a conference call on Tuesday.

"Demand for our high-performance Westmere [32nm] and Nehalem EX processors drove server microprocessor revenue up over 30 percent year-over-year," Otellini said. "Shipments into the cloud segment are up a very strong 200 percent from a year ago and up 50 percent from just last quarter. Our storage business is up 29 percent year-over-year, emphasising that the Xeon product family is not just for servers but has become an important brand in the datacentre."

Otellini saw good prospects in an upcoming new market for Intel's embedded processor business, that of the Atom-powered Google TVs being launched in October.

He also talked up Intel's prospects in the tablet market. At the moment, Intel processors power only AT&T and Cisco tablets, while ARM's chip architecture dominates the rest of the market. However, Otellini said the company is taking a "longer view" with this growing computing segment.

"We think tablets are exciting and we fully welcome their arrival," Otellini said. "Apple has done a wonderful job reinventing the category. We believe that, like netbooks, tablets will expand the [available market] for computing overall with a new form factor and new uses that bring computing to even more aspects of our lives.

"Will they impact PC sales? Sure, at the margin they probably will," he added. "Consumers will have a limited amount of discretionary income, and some will choose to purchase a tablet instead of upgrading an existing PC or purchasing a netbook in any given period. We saw the same thing happen when netbooks were introduced, but three years later both the PC and the netbook segments have grown substantially, and we believe that will happen again with tablets."

Within the netbook sector, cheap subnotebooks are now a mature market and therefore not growing as strongly as other segments, Intel chief financial officer Stacy Smith said on the call. He indicated that Intel is not, for now, planning any purchases on the scale of its $7.68bn McAfee buy announced in August.

"Though we always look for opportunities to create shareholder value, there are no other large acquisitions being contemplated," Smith said.

Otellini also forecast that Intel's Sandy Bridge line, the company's first major redesign of the x86 architecture on the 32nm scale, is going to have a big impact when systems go on sale in the first quarter of 2011. The integrated graphics in these products will supposedly match the performance of low-end discrete graphics processors, the company says, and security and manageability will also see a boost.

"[Sandy Bridge will represent] the largest increase in computing performance in our history," Otellini said. "We anticipate a very fast ramp. We exit the third quarter with the highest revenue in our history, with expectations of Q4 being even better, and we will see double-digit growth in PCs [next year]."

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