Finally some good news from the tech sector this morning: industry bellwether Intel has reported its best quarterly profits in 42 years, $2.9bn on revenues of $10.8bn – much better than Wall Street analysts were expecting. This is obviously great news for Intel, but it’s also a sign that companies are investing in technology again, as they can no longer ignore the creaking performance of their old systems, and budgetary restraints ease a bit. And that’s something we can all be pleased about.
Intel trounced Wall Street forecasts in its second quarter to the end of June, the near $3bn profits especially impressive since it recorded a loss of $398m in the same period last year (although admittedly that was distorted by a $1.4bn fine levied by the European Commission after a competition investigation). Meanwhile its profit margin hit 67% – higher than the 64% expected by analysts. In fact, Intel is feeling so bullish that it is already predicting a similar result for its third quarter, with revenues of $11.2bn to $12bn, well ahead of analysts’ forecasts of $10.9bn.
Intel CEO Paul Otellini is attributing the chip-makers’s good fortune to the fact that many companies, having held off buying new hardware for the last year or two, are now having to replace kit that would simply collapse under the strain of the latest software if they didn’t. The risks of not replacing critical infrastructure such as servers becomes unacceptable beyond a certain point. ‘Now that corporations have some breathing room in the economy and their budgets, you're starting to see those machines that were four or five years old get refreshed,’ said Otellini.
No wonder, then, that Intel’s good news pushed stocks up across the board, with Intel itself enjoying a 5% bounce. After all, when a company upgrades all its hardware it’s not just Intel that benefits, but the entire supply chain. Closer to home, it certainly doesn’t seem to have done British chipmaker ARM any harm – shares in the Cambridge-based company rose 4.3% this morning, so the rising tech tide floats all boats, even Intel’s rivals. Cheers all round.
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