Intel's first quarter results were as strong as advertised as the company delivered revenue down just a smidge from the fourth quarter tally. Typically, there's a seasonal drop off in sales.
The company reported net income of $2.4 billion, or 42 cents a share, on revenue of $10.3 billion, up 44 percent from a year ago and off a mere 3 percent from the fourth quarter. Wall Street was expecting earnings of 38 cents a share on revenue of $9.84 billion. Gross margins for the fourth quarter were 63.4 percent.
Intel raised its outlook for the second quarter (statement, preview). Intel is projecting revenue of $10.2 billion, give or take $400 million, with gross margins of 64 percent or so. Wall Street was expecting $9.7 billion. For 2010, Intel said it will deliver gross margins of 64 percent or so, up from its previous estimate of 61 percent. The company will spend $6.4 billion on research and development and capital spending will come in about $4.8 billion.
In a call with analysts, CEO Paul S. Otellini declared the industry "nearly fully recovered. " He said the company has its "best product line" ever and that the demand for the products "has been incredible." In particular, the mobile business saw record revenues as demand for notebooks exceeded expectations while the demand by businesses, which now have aging PC fleets, is starting to return.
He said the overall shift to mobility is one of the mega-trends out there for both consumer and corporate. He said the first quarter and the first half are "buoyed" by a number of things, including a "compelling pull" for the new products and the return of corporate spending.
However, he stopped short of calling it a "corporate refresh snapback." It's not that, he said. CIOs have a few bucks freeing up in their budgets and they're replacing some of the older machines because it's actually cheaper to replace them than maintain them. But there are tradeoffs for servers and software - and for now, PCs are benefiting from that tradeoff.
On the topic of netbooks and tablets, Otellini said that netbooks - viewed on an annual basis - are on track to represent about 20 percent of the mobility business, despite seasonal upticks and the benefits of new players in Q4 and carryover into Q1. As for tablets, he said he sees that market the way he did netbooks two years ago - a new category that's market expansive. Looking forward, he expects to announce new tablet form factors later this year, using Atom on a number of different operating systems.
By the numbers:
- Intel's PC client group delivered revenue of $7.67 billion, flat with the fourth quarter, but well above year ago levels;
- Data center revenue fell 8 percent from the fourth quarter to $1.87 billion;
- Atom processor and chipset revenue was $355 million, down 19 percent;
- Average selling prices rose slightly;
- Asia Pacific revenue accounted for 57 percent of sales in the first quarter with the Americas checking in at 18 percent.
Key excerpts from CFO Stacy Smith:
- "The ramp of our new mobile products led to better than expected average selling prices. Supply chain inventory levels appear to be healthy after several quarters of replenishment."
- "Europe, Asia Pacific and Japan performed better than seasonal. The Americas experienced a larger than seasonal revenue decline after a strong fourth quarter."