Intel: The bottom is in for PC demand

Intel reported a first quarter profit of US$647 million on revenue of US$7.1 billion, beating Wall Street's estimates and suggesting that sluggish PC demand may have bottomed out.
Written by Sam Diaz, Inactive

Intel reported a first quarter profit of US$647 million, or US$0.11 per share, on revenue of US$7.1 billion, beating Wall Street's estimates and suggesting that the sluggish PC industry may have finally bottomed out. Analysts had been expecting earnings of US$0.02 on revenue of US$6.98 billion.

In a statement, Intel president and CEO Paul Otellini offered rays of hope that the worst may be behind us. He said:

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. We're delivering a product portfolio that meets the needs of the changing market, spanning affordable computing to high-performance, energy-efficient computing.

Still, the numbers represent big declines from the previous year as the economy has taken its toll on Intel and other technology bellweathers. Revenue was down 26 percent from the same quarter a year ago. Net income and EPS were down from the year-ago quarter by 55 percent and 56 percent, respectively. But that came as no big surprise.

Despite the stronger-than-expected quarter, the company did not issue a forecast for the second quarter but said that, for internal purposes, the company is planning for the revenue to be flat. At the end of the quarter, the company launched the new Xeon (Nehalem) chips, calling it 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 today, Otellini said the response to Nehalem has been "remarkable" and that the company should ship its 1 millionth chip this week. He also noted that the consumer segment "held up much better than the enterprise", especially in notebooks.

The company also said that revenue from the Atom microprocessors and chipsets was US$219 million for the quarter, down 27 percent sequentially. At an investor conference in February, Otellini said that he didn't see netbooks--which use the Atom chips--cannibalizing notebooks. Instead, he said, the growth of netbooks will take off in a similar way that cell phones are now sold--subsidized by the service provider and tied to a contract to get them in hands of users.

His best guess is that one-third of the volume will move that way this year and that it will grow to one-half next year.

Shares of Intel were up slightly in regular trading, closing at US$16.01. Shares fell in after-hours trading, down more than 5 percent.

This article was first published as a blog post on ZDNet.com.

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